Answered: ) At the end of one year, how much will…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter17: Financial Markets

Section: Chapter Questions

Problem 40P: Many retirement funds charge an administrative fee each year equal to 0.25% on managed assets....

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5. Suppose Alex and Spenser each invest $5,000 in the same stock. Alex invests directly and earns 5% a year. Spenser uses a retirement fund, which charges an administrative fee equal to 0.25% on managed assets, and earns 4.75%.
a) At the end of one year, how much will Alex and Spenser have?
b) If Alex and Spenser leave their investments in place for 30 years, with annual compounding of
the interest, how much more will Alex have than Spenser at the end of the 30-year period?

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