Question

Sue and Neal are twins. Sue invests $5,000 at 7 percent when she is 25 years old. Neal invests $5,000 at 7 percent when he is 30 years old. Both investments compound interest annually. Both Sue and Neal retire at age 60. Which one of the following statements is correct assuming neither Sue nor Neal withdraw any money from their accounts prior to retiring?
A. Neal will earn more compound interest than Sue.
B. Sue will have more money than Neal at age 60.
C. Sue will have less money when she retires than Neal.
D. If both Sue and Neal wait to age 70 to retire they will have equal amounts of savings.
E. Neal will earn more interest on interest than Sue.

Answer 1

Answer:

B. Sue will have more money than Neal at age 60

Explanation:

Sue and Neal invest the same amount of money ($5,000) at the same interest rate (7%), but Neal makes the investment 5 years later than Sue and they will be retire at the same time. Therefore Sue´s investment will earn more compound interest than Neal´s, so she will have more money at age 60.