Pat and Jaimie are twins. They will both invest $2,500 on their 20^th birthday. Pat's money will accumulate at 14% compounded annually for 35 years until their 55^th birthday. Being less of a risk taker Jamie will select an investment that will provide a return of only 8.5% compounded annually. If when they reach age 055, Jamie decides to leave the money growing at 8.5% how many more years will it take for Jamie's investment to reach the value that Pat's will be at age 55? A) 9.3 years B) 21.2 years C) 14.3 years D) 27.4 years E) 18.4 years

Question

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Pat's investment will be worth $2,500(1.14)^35 = $33,863.47 at age 55.Jamie's investment will be worth $2,500(1.085)^35 = $10,530.96 at age 55.To reach the same value as Pat's, Jamie's investment will need to grow by $33,863.47 - $10,530.96 = $23,332.51.At 8.5% compounded annually, it will take Jamie's investment 23,332.51 / (2,500 * 0.085) = 108.5 years to reach the same value as Pat's.Since Jamie's investment is already 35 years old, it will take 108.5 - 35 = 73.5 years more to reach the same value as Pat's.

Pat and Jaimie Are Twins