Question

Theresa adds $1,500 to her savings account on the first day of each year. marcus adds $1,500 to his savings account on the last day of each year. they both earn 6.5 percent annual interest. what is the difference in their savings account balances at the end of 35 years?

Answer 1

Answer:

difference = $12093.38

Explanation:

given data

adds 1st day in saving account = $1,500

adds last day in saving account = $1,500

annual interest = 6.5 %

time = 35 year

to find out

difference in their savings account balances

solution

we get there first Theresa  future value that is

future value 1 = present value × $\frac{(1+rate)^{time} - 1}{rate}$   ....1

future value 1 = $1500 × $\frac{(1+0.065)^{35} - 1}{0.065}$

future value 1  = $186052.04

and

future value 2 = present value × $\frac{(1+rate)^{time} - 1}{rate}$ ×  (1+rate)  .........2

future value 2 = $1500 × $\frac{(1+0.065)^{35} - 1}{0.065}$ ×  (1+0.065)

future value 2 = $198145.42

so that here difference is

Difference = $198145.42 - $186052.04

difference = $12093.38