Question

You invest $2,000.00 in a stock plan and another $2,000.00 in a savings account. The stock plan decreases by 7% the first year and gains 10% the second year. The savings account earns a 3.7% APR and compounds annually. What is the difference in earnings between the stock and savings account at the end of the second year?

Answer 1

$104.738

Explanation:

Let's work out the stock plan first:

$2,000 - 7% in the first year = $1,860

$1,860 + 10% = $2,046 in the second year

Savings account:

$2,000 + 3.7% = $2,074 in the first year

$2,074 + 3.7% = $2,150.738 in the second year

The difference:

$2,150.738 - $2,046 = $104.738