Kayla and two of her friends form an investment club. Each contributes $250 to an account that earns 5% interest, compounded annually. Instead of joining the investment club, Sheri decides to invest her $250 in an individual account that also pays 5% interest, compounded annually. No other deposits or withdrawals are made to either account. After 3 years, each member of the investment club receives an equal share of the balance in their account. Compare the equal share amount received by Kayla and her two friends to the balance in Sheri's individual account? (to the nearest dollar)
Question
Answer:
The multiplier of each account's value is 1.05³ = 1.157625.The $750 in the club's account will grow to
$750×1.157625 = 868.22
and each member will get 1/3 of that amount, $289.
The $250 in Sheri's individual account will grow to
$250×1.157625 = $289.
Sheri, Kayla, and Kayla's two friends will all have the same amount as a result of their investments.
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10 months ago
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