Mina, who is self-employed, wants to invest $60,000 in a pension plan. One investment offers 8% compounded
Question:
Mina, who is self-employed, wants to invest $60,000 in a pension plan. One investment offers 8% compounded quarterly. Another offers 7.75% compounded continuously.
(a) Which investment will earn the most interest in 5 years?
(b) How much more will the better plan earn?
(c) What is the effective rate in each case?
(d) If Mina chooses the plan with continuous compounding, how long will it take for her $60,000 to grow to $80,000?
(e) How long will it take for her $60,000 to grow to at least $80,000 if she chooses the plan with quarterly compounding?
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