Question

Stella invested $6100 in an account paying interest rate of 6 1/2 % compounded monthly. Katherine invested $6100 in an account paying an interest rate of 6 5/8 % compounded quarterly. After 7 years how much more money would Katherine have in here account than Stella, to the nearest dollar

Answer 1

Katherine would have $109.54 more than Stella.

Explanation:

Giving the following information:

Stella:

Initial investment (PV)= $6,100

Interest rate (i)= 0.065/12= 0.0054 per month

Number of periods (n)= 7*12= 84

Katherine:

Initial investment (PV)= $6,100

Interest rate (i)= 0.06625/4= 0.0167

Number of periods (n)= 7*4= 28

To calculate the future value, we need to use the following formula:

FV= PV*(1 + i)^n

Stella:

FV= 6,100*(1.0054^84)

FV= $9,589.5

Katherine:

FV= 6,100*(1.0167^28)

FV= $9,699.04

Difference= $109.54

Katherine would have $109.54 more than Stella.