Question

4. Maggie contributed $2,000 every year into her retirement account, while Sally contributed $3,500 into hers. If the return on both accounts averaged 8% annually, how much more was in Sally’s account at the end of 20 years?

a. $68,643

b. $205,929

c. $91,524

d. $160,167

Answer 1

We need to determine the future value using excel as:

Future value of Maggie's contribution:
Given that;
Number of years = 20
Payment or contribution every year=$2000
Rate of return=8%
So, the future value at the end of 20 years will be:

Hence, the future value at the end of 20 years is $91,523.93

Similarly the future value of Sally's contribution (with a yearly payment of $3,500) will be:

Future value=$160,166.88

So, the difference is $160,166.88-$91,523.93=$68642.95 or $68643 (Rounded to the nearest dollar)

Answer: Sally’s account will have $68,643 more at the end of 20 years. Option a is correct.