A and B make 500 deposits into an account taht earns 7 A tak

A and B make $500 deposits into an account taht earns 7%. A takes his money out in 5 years. B withdraw her money in 8 years. All else equal, which of the following is true? a. A will have the higher withdrawal. b. B will have the higher withdrawal.

Solution

Correct option is > b. B will have the higher withdrawal.

Because B will deposit for more number of years.

Working:

Future Value for A = Present value x (1+Rate)^Years

= 500 x (1+7%)^5

= $701.28

Future Value for B = Present value x (1+Rate)^Years

= 500 x (1+7%)^8

= $859.09