Final answer:
Ashley's account increased by $2,332 due to a 26.5% interest rate, resulting in a total of $11,132 at the end of the year. To determine how much more Alexx would have than Spenser after 30 years due to differences in interest rates, one would calculate the compound interest for both and find the difference.
Step-by-step explanation:
Last year, Ashley opened an investment account with $8,800. At the end of the year, the amount in the account had increased by 26.5%. To calculate the increase in dollars, we use the formula:
Interest = Principal × Interest Rate
In Ashley's case, the calculation would be Interest = $8,800 × 0.265, which equals $2,332. The total amount in her account at the end of last year would then be the original principal plus the interest, so Account Total = $8,800 + $2,332, which equals $11,132.
When comparing Alexx and Spenser's investments over 30 years, assuming Alexx earns a direct 5% and Spenser earns 4.75% due to retirement fund fees, we must calculate the total amount for each using the formula for compound interest:
A = P (1 + r/n)^(n*t)
For Alexx: A = $5,000 × (1 + 0.05/1)^(1*30)
For Spenser: A = $5,000 × (1 + 0.0475/1)^(1*30)
We then subtract Spenser's total from Alexx's total to find the difference.