Mira has saved $25,000 over the years and she has the option of investing it in either of the two investment plans. Investment A offers 12 percent interest compounded monthly, whereas Investment B pays 13 percent interest compounded semiannually. What would be the difference between the future values of the two investments if Mira's investment horizon is seven years? (Round your answer to two decimal places.)
A) $4,204.52
B) $3,577.87
C) $1,152.34
D) $2,703.79
E) $3,250.22

Question

Quizplus · Accepted Answer

To find the future value of each investment, use the compound interest formula: FV = P(1 + r/n)^(nt). For Investment A: FV = 25000(1 + 0.12/12)^(12*7). For Investment B: FV = 25000(1 + 0.13/2)^(2*7). Calculate each and find the difference. The difference is approximately $2,703.79.

Mira Has Saved $25,000 Over the Years and She Has