Question #16 – Financial Analysis

At the end of a five-year period who will have the greatest amount of money saved?

  1. Edgar who deposited $10,000 at the beginning of the period and saw his money grow at a rate of 5% per year (compounded annually).
  2. Francis who made annual contributions of $2,000 at the beginning of each year and saw her money grow at a rate of 7% (compounded annually).
  3. Grant who made monthly deposits of $165 at the end of each month and received an 8% rate of return (compounded monthly).
  4. All will have the same amount at the end of 5 years.
Solution: Edgar will have $10,000 (1.055) = $12,763. Francis will have $12,307 which we use our financial calculators to figure out. Lastly, Grant will have $12,124 at the end of the five-year period. The correct answer is a.