Kristina Is Deciding Whether to Deposit $1,000 Per Year for 10

question 144

Short Answer

Kristina is deciding whether to deposit $1,000 per year for 10 years into an RRSP, or to wait five years, and then deposit $2,000 per year. If interest is 4.25% compounded yearly, which option should Kristina choose? What is the economic advantage of her choice?

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Definitions:

Goal-Directed Behavior

Actions or series of actions that an individual initiates and maintains to achieve a specific objective.

Conservation

The principle that certain properties remain the same despite changes in the form of objects, or understanding the permanence of quantity despite changes in the shape or container.

Egocentrism

A cognitive characteristic in which an individual has difficulty seeing the world from perspectives other than their own, often observed in early childhood development.

Object Permanence

The realization that objects still exist even when they are not perceivable through sight, hearing, touch, smell, or any sensory means.