Sixteen years ago, Alicia invested $1,000. Eight years ago, Travis invested $2,000. Today, both Alicia's and Travis' investments are each worth $2,400. Assume that both Alicia and Travis continue to earn their respective rates of return. Which one of the following statements is correct concerning these investments?

Question

Quizplus · Accepted Answer

Alicia: $2,400 = $1,000 F1F1F1S1F1F1F10 (1 + r)¹⁶; r = 5.62 percentTravis: $2,400 = $2,000 F1F1F1S1F1F1F10 (1 + r)⁸; r = 2.31 percent Since both Alicia and Travis have equal account values today and since Alicia earns the higher rate of return, her account had to be worth less than Travis' account one year ago.

Sixteen Years Ago, Alicia Invested $1,000