Account A: $300 monthly deposits, interest rate is 4.2%. Account B: $250 monthly deposits, interest rate is 5.1%. Which account
will have a greater value at the end of 15 years?
a. Account A will be greater than Account B.
b. Account B will be greater because the interest rate is higher.
c. They will be worth about the same.
d. Not enough information.
1 answer:
Answer:
A
Step-by-step explanation:
We have to determine the future value of the annuity to determine which account has a greater value
Future value = Amount x annuity factor
annuity factor = Annuity factor = {[(1+r)^n] - 1} / r
Account A = 300 x[ (1.042)^15 - 1 ] / 0.042 = $6097.14
Account B = 250 x[ (1.051)^15 - 1 ] / 0.051 = $5435,42
Account A will be greater
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