Question

Megan is 45 years old and would like to retire by the age of 65. Her portfolio manager gives her two investment options.

a. Option 1 has the larger balance of $307,804.32.
b. Option 2 has the larger balance of $307,804.32.
c. Option 2 has the larger balance of $311,121.57.
d. Option 1 has the larger balance of $311,121.57.

Answer 1

After 30 years, Alexx will have $12,405.18 and Spenser will have $12,304.36. Therefore, Alexx will have $100.82 more than Spenser.

Step-by-step explanation:

To determine how much more Alexx will have than Spenser after 30 years, we need to calculate the compound interest earned by each of them. Alexx's initial investment of $5,000 will grow over 30 years at a rate of 5% per year, while Spenser's investment in a retirement fund will grow at a rate of 4.75% per year. After 30 years, Alexx will have:

$5,000 * (1 + 0.05)^{30} = $12,405.18

Similarly, Spenser will have:

$5,000 * (1 + 0.0475)^{30} = $12,304.36

Therefore, the difference between Alexx and Spenser's balances after 30 years is:

$12,405.18 - $12,304.36 = $100.82