Mira has saved $25,000 over the years and she has the option of investing it in either of the two investment plans. Investment A offers 12 percent interest compounded monthly, whereas Investment B pays 13 percent interest compounded semiannually. What would be the difference between the future values of the two investments if Mira's investment horizon is seven years?
A)$4,204.52
B)$3,577.87
C)$1,152.34
D)$2,703.78
E)$3,250.22

Question

Quizplus · Accepted Answer

To find the future value of each investment, use the formula for compound interest: FV = P(1 + r/n)^(nt). For Investment A: FV = 25000(1 + 0.12/12)^(12*7). For Investment B: FV = 25000(1 + 0.13/2)^(2*7). Calculate both and find the difference. The difference is approximately $2,703.78.

Mira Has Saved $25,000 Over the Years and She Has