Two Sisters Each Open IRAs in 2011 and Plan to Invest

question 81

Multiple Choice

Two sisters each open IRAs in 2011 and plan to invest $3,000 per year for the next 30 years.Mary makes her first deposit on January 1,2011,and will make all future deposits on the first day of the year.Jane makes her first deposit on December 31,2011,and will continue to make her annual deposits on the last day of each year.At the end of 30 years,the difference in the value of the IRAs (rounded to the nearest dollar) ,assuming an interest rate of 7% per year,will be

• A) $19,837.
• B) $12,456.
• C) $6,300.
• D) $210.

---

Definitions:

Net Profit

The amount of income that remains after all operating expenses, taxes, and costs have been subtracted from total revenue.

Call Contracts

Financial derivatives that give the holder the right, but not the obligation, to buy an asset at a set price within a specific time period.

Underlying Stock

The security on which a derivative instrument, such as an option or a warrant, is based.

Black-Scholes Option Pricing Model

A mathematical model used to determine the theoretical price of European put and call options, incorporating factors like volatility and time to expiration.