Assume That Two People Save $100 Per Month (The Same

question 124

Multiple Choice

Assume that two people save $100 per month (the same for both) and earn exactly the same positive annual interest rate of 2 percent.Also assume that one of them started saving at 20 years old,while the other started saving at 40 years old.Which statement is correct?

• A) On their 60th birthday,the one who started saving later would have exactly half as much as the one who began saving earlier.
• B) On their 60th birthday,they would both have the same amount.
• C) On their 60th birthday,the one who started saving later would have less than half the amount that the one who began saving earlier has.
• D) On their 60th birthday,the one who started saving later would have received a larger real interest rate,but not enough to "catch up" to the one who began saving earlier.
• E) On their 60th birthday,neither would have anything if inflation had been negative during the period.

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Definitions:

Exchange

The act of giving one thing and receiving another, especially of the same type or value, in return.

Interdependence

A condition where entities are mutually reliant on each other, such that the actions of one significantly affect the others in a social, economic, or ecological system.

Independence

refers to the state of being free from external control or influence, often used in the context of countries achieving sovereignty.