You just invested $49,000 that you received as an insurance settlement. How much more will this account be worth in 40 years if you earn an average return of 7.6 percent rather than just 7.1 percent?
A) $59,818.92
B) $98,509.16
C) $140,423.33
D) $155,986.70
E) $138,342.91

Question

Quizplus · Accepted Answer

We can use the compound interest formula to calculate the future value of the investment with a 7.1% return:

FV = PV(1 + r)^n
FV = 49,000(1 + 0.071)^40
FV = 333,829.18

Now we can use the same formula with a 7.6% return:

FV = PV(1 + r)^n
FV = 49,000(1 + 0.076)^40
FV = 489,815.88

The difference between these two future values is:

FV at 7.6% - FV at 7.1% = 489,815.88 - 333,829.18 = 155,986.70

Therefore, the account will be worth $155,986.70 more in 40 years if the average return is increased from 7.1% to 7.6%. The answer is D.

You Just Invested $49,000 That You Received as an Insurance