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Karlee invests $200 a month starting when she is 16 and continues for 10 years. At this time she does not invest any more money, but the money is reinvested at the same rate and continues earning interest. Chase invests$200 a month starting when he is 25. Assuming the interest rate is 8%

compounded monthly for each investment, who will have more money at age 65? How much more?

Jan 27, 2022

#1
+3

I get Karlee has  $825 544.94 and Chase has$702 856.25

I got the formula off the net $$r=\frac{8\%}{12 }= 0.08/12 = 0.00\dot 6 \\ P=200\\ \text{n = number of months.}$$

See if you can take if from there.

k

Jan 27, 2022
#2
+2

Using the formula that Melody posted....  I get   Karlee has ( r = .006666667    I think this is where our answers differ)   894,064.89

and Chase has  702 856.24

Jan 27, 2022
#3
+2

No that is not why our results differ.    Your r is the same as mine, you, or rather your calculator, has just rounded off r.

BUT it would not make THAT mcuh difference.

You have to use 2 formulas for Karlee.

First the Future value of an annuity due (120 months), and then the compound interest formula  (12*39 months)

Melody  Jan 27, 2022
#4
+2

Hey Melody.... I didn't round...... the diff was my mistake  using  Kaylee's 10 year balance for 40 years  ( SHOULD be  39)  ....should have re-read the Q ! ElectricPavlov  Jan 27, 2022
#5
+2

The inominative interest rate rate is  8% p.a   or   0.08% pa

$$\frac{0.08}{12} = 0.00\dot 6$$       per month

Jan 27, 2022
#6
+2

Yah....didn't see the little dot above the 6 ...I am more accustomed to a bar...though I have seen the dot before...

ElectricPavlov  Jan 28, 2022
#7
+2

ok, that explains the confusion.  :)

Melody  Jan 28, 2022