Question

Your older sister deposited $2,500 today at 6.5 percent interest for 15 years. However, you can only earn 6.25 percent interest. How much more money must you deposit today than your sister did if you are to have the same amount saved at the end of the 15 years?

Answer 1

Answer:

$89.66

Explanation:

Data provided in the question:

Amount deposited by sister = $2,500

Interest earned by sister = 6.5% = 0.065

Time = 15 years

Now,

let the amount to be deposited be 'P'

Therefore,

using the compounding formula

$2,500 × (1 + 0.065)¹⁵ = P × (1 + 0.0625)¹⁵

or

$2,500 × 2.5718 = P × 2.48276

or

P = $2,589.66

Therefore,

Extra amount to be deposited = $2,589.66 - $2,500

= $89.66