Question

John makes $2,800 per month and has an opportunity to invest $150 per month at an APR of 4.5% in a 401K plan through work. He plans to retire in 30 years.

Answer 1

Alexx will have $297.70 more than Spenser after 30 years.

Step-by-step explanation:

In this question, we are asked about the difference between the final amounts of money that Alexx and Spenser would have after 30 years if they each invested $5,000 in the same stock. Alexx invests directly and earns 5% a year, while Spenser uses a retirement fund and earns 4.75% per year. We can calculate the final amounts by using the formula for compound interest:

A = P(1+r/n)^(nt)

where A is the final amount, P is the principal (initial amount), r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years. We can plug in the values for each person to calculate their final amounts:

Alexx:

P = $5,000, r = 5%, n = 1, t = 30

A = 5000(1+0.05/1)^(1*30) = $11,467.40

Spenser:

P = $5,000, r = 4.75%, n = 1, t = 30

A = 5000(1+0.0475/1)^(1*30) = $11,169.70

Therefore, Alexx will have $11,467.40 - $11,169.70 = $297.70 more than Spenser after 30 years.

Answer 2

Question

How much money will he deposit into the 401K over the 30 years?

Answer:

$54000

Step-by-step explanation:

Since every month he will be depositing $150 and a year has 12 months, then each year he will be depositing 12*150=$1800

For 30 years, this will be given as 30*1800=$54000

Therefore, the amount deposited after 30 years will be $54000