When Joe and Sarah graduate from college, each expects to work a total of 45 years. Joe begins saving for retirement immediately. He plans to deposit $625 at the end of each quarter into an account paying 8.1% interest, compounded quarterly, for 10 years. He will then leave his balance in the account, earning the same interest rate, but make no further deposits for 35 years. Sarah plans to save nothing during the first 10 years and then begin depositing $625 at the end of each quarter in an account paying 8.1% interest, compounded quarterly for 35 years. Complete parts (a) through (e) below. a. Without doing any calculations, predict which one will have the most in his or her retirement account after 45 years. Then test your prediction by answering the following questions. Choose the correct answer below. OA. Sarah will have more in her account after 45 years. Joe earned interest for 10 more years than Sarah, but Sarah contributed monthly payments for a lot longer than Joe. OB. Joe will have more in his account after 45 years. Sarah contributed more money overall, but Joe was earning 8.1% interest per quarter for 35 years. OC. Both Joe and Sarah will have the same amount of money in their accounts because they were both earning 8.1% interest on their money for 35 years. OD. Sarah will have more in her account after 45 years. Sarah contributed more overall, so she will have more money in her account.
When Joe and Sarah graduate from college, each expects to work a total of 45 years. Joe begins saving for retirement immediately. He plans to deposit $625 at the end of each quarter into an account paying 8.1% interest, compounded quarterly, for 10 years. He will then leave his balance in the account, earning the same interest rate, but make no further deposits for 35 years. Sarah plans to save nothing during the first 10 years and then begin depositing $625 at the end of each quarter in an account paying 8.1% interest, compounded quarterly for 35 years. Complete parts (a) through (e) below. a. Without doing any calculations, predict which one will have the most in his or her retirement account after 45 years. Then test your prediction by answering the following questions. Choose the correct answer below. OA. Sarah will have more in her account after 45 years. Joe earned interest for 10 more years than Sarah, but Sarah contributed monthly payments for a lot longer than Joe. OB. Joe will have more in his account after 45 years. Sarah contributed more money overall, but Joe was earning 8.1% interest per quarter for 35 years. OC. Both Joe and Sarah will have the same amount of money in their accounts because they were both earning 8.1% interest on their money for 35 years. OD. Sarah will have more in her account after 45 years. Sarah contributed more overall, so she will have more money in her account.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Transcribed Image Text:When Joe and Sarah graduate from college, each expects to work a total of 45 years. Joe begins saving for retirement
immediately. He plans to deposit $625 at the end of each quarter into an account paying 8.1% interest, compounded
quarterly, for 10 years. He will then leave his balance in the account, earning the same interest rate, but make no further
deposits for 35 years. Sarah plans to save nothing during the first 10 years and then begin depositing $625 at the end of
each quarter in an account paying 8.1% interest, compounded quarterly for 35 years. Complete parts (a) through (e)
below.
a. Without doing any calculations, predict which one will have the most in his or her retirement account after 45 years.
Then test your prediction by answering the following questions. Choose the correct answer below.
OA. Sarah will have more in her account after 45 years. Joe earned interest for 10 more years than Sarah, but
Sarah contributed monthly payments for a lot longer than Joe.
B. Joe will have more in his account after 45 years. Sarah contributed more money overall, but Joe was earning
8.1% interest per quarter for 35 years.
OC. Both Joe and Sarah will have the same amount of money in their accounts because they were both earning
8.1% interest on their money for 35 years.
OD. Sarah will have more in her account after 45 years. Sarah contributed more overall, so she will have more
money in her account.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education