Question

Consider the two savings plans below. Compare the balances in each plan after 8 years. Which person deposited more money in the​ plan? Which of the two investment strategies is​ better?

Yolanda deposits $300 per month in an account with an APR of 6​%, while Zach deposits ​$3600 at the end of each year in an account with an APR of 6%.

The balance in​ Yolanda's saving plan after 8 years was ​$

Now calculate the balance in​ Zach's savings plan.

Answer 1

Yolanda deposits $300 per month in an account with an APR of 6​%

Monthly interest rate, r = 6%/12 = 0.005

n = 8 * 12 = 96 months

The balance in Yolanda's savings plan after 8 years was $36,848.56251

Zach deposits ​$3600 at the end of each year in an account with an APR of 6%.

n = 8

The balance in Zach's savings plan after 8 years was $35,630.88447

Yolanda deposited 300 * 96 = $28,800

Zach deposited 3,600 * 8 = $28,800

They both deposited the same amount.

Saving monthly is better than saving yearly because we give more time for investment to compound. So, Yolanda's investment strategy is better.