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Adita has two options for how to invest $1,000.


Plan A: Put the $1,000 in an account that pays $100 per year.

Plan B: Put the $1,000 in an account that pays 5 percent interest per year.


Which statement is true?

Plan A will be worth more than plan B after two years.

Plan A will be worth the same amount as plan B after one year.

Plan B will be worth more than plan A after three years.

Plan B will be worth more than plan A after four years.

Verified Answer :

Hagrid

First let's calculation
Plan A = 1000 dollars to be invested in an account that pays 100 dollars per year. (1000 + 100 = 1100 dollars in a year)
Plab B = 1000 dollars to be invested in an account that pays 5% interests per year  (1000 * .05 = 50 => 1000 + 50 = 1050 dollars per year)
Thus the correct answer is Plan A will be worth more than plan B after two years.

The true statement is Plan A will be worth more than plan B after two years.

What is the worth of the plans with the passage of time?

The equation that can be used to represent the future value of plan A:

Total value = initial value x ($100 x number of years)

Value in 2 years: 1000 x (100 x 2) = $1200

Value in 3 years: 1000 x (100 x 3) = $1300

Value in 4 years: 1000 x (100 x 4) = $1400

The equation that can be used to represent the future value of plan B:

FV = P (1 + r)^n

  • FV = Future value
  • P = Present value
  • R = interest rate
  • N = number of years

  • Value in 2 years: 1000 x(1.05^2) = $1102.50
  • Value in 3 years: 1000 x(1.05^3) = 1157.63
  • Value in 4 years: 1000 x(1.05^2) = 1215.51

To learn more about future value, please check: https://brainly.com/question/18760477

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