Joan is diligent and, starting on her 19th Birthday, she deposits ...

[naturalchemist]

Joan is diligent and, starting on her 19th Birthday, she deposits 1,000 in a bank account that pays an interest rate of 10. She continues to save for six more years culminating on her 25th birthday.
 
  After that birthday she stops saving but leaves her accumulated savings in a bank account for 40 years (to age 65). Roseanne is a partier and doesn't start saving until her 26th birthday, at which time she starts saving 1,000 a year until her 65th birthday. (Assume that Roseanne also earns a rate of 10.) Who has more at age 65?
  A) Roseanne
  B) Joan
  C) They will have the same amount of money.

Question 2

Given the following cash flows, what is the future value at year six when compounded at an interest rate of 8.0?
 
  Year 0 2 4 6
  Cash Flow 5,000 7,000 9,000 11,000
 
  A) 38,955.39
  B) 56,687.43
  C) 42,074.42
  D) 32,000.00

[rachel]

Answer to Question 1

A

Answer to Question 2

Answer: A
Explanation: A) FV =  PV  (1 + r)n = 5,000  (1.08)6 + 7,000  (1.08)4 + 9,000  (1.08)2 + 11,000  (1.08)0 = 38,955.39.