Answer:
Kate will have $2,178 more than Janice
Explanation:
The constant saving of $75 and $80 each month is an annuity payment. The Balance at the end of 20 years of a constant payment is the future value of annuity.
n = number of months = 20 x 12 = 240 months
r = Average rate = 5.5% per year = 5.5% / 12 = 0.46%
Future value of annuity = FV = P x ( [ 1 + r ]^n - 1 ) / r
Janice
Saving per month = $75
FV = $75 x ( [ 1 + 5.5%/12 ]^240 - 1 ) / 5.5%/12 = $32,672
Kate
Saving per month = $80
FV = $80 x ( [ 1 + 5.5%/12 ]^240 - 1 ) / 5.5%/12 = 34,850.2
Difference = $34850.2 - 32,672 = $2,178
