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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

Many retirement funds charge an administrative fee each year equal to 0.25% on managed assets. Suppose that Alexx and Spenser each invest Chapter 17, Problem 40P, Many retirement funds charge an administrative fee each year equal to 0.25% on managed assets. , example  1 in the same stock this year. Alexx invests directly and earns Chapter 17, Problem 40P, Many retirement funds charge an administrative fee each year equal to 0.25% on managed assets. , example  2 a year. Spenser uses a retirement fund and earns Chapter 17, Problem 40P, Many retirement funds charge an administrative fee each year equal to 0.25% on managed assets. , example  3 After 30 years, how much more will Alexx have than Spenser?

To determine

With the given data the difference in the A’s and S’s money is to be determined.

Explanation

Given:

P=$5, 000, n=30 years, r=5%, for A and 4.75% for S

Using compound interest formulae for A

  A=P ( 1+ r 100)n             A=$5000( 1+ 5 100)30A=$5,000( 1+0.05)30A=$5,000( 1.05)30A=5000×4

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