Sue and Neal Are Twins

question 1

Multiple Choice

Sue and Neal are twins.Sue invests $5,000 at 7 percent when she is 25 years old.Neal invests $5,000 at 7 percent when he is 30 years old.Both investments compound interest annually.Both Sue and Neal retire at age 60.Which one of the following statements is correct assuming that neither Sue nor Neal has withdrawn any money from their accounts?

• A)Sue will have less money when she retires than Neal.
• B)Neal will earn more interest on interest than Sue.
• C)Neal will earn more compound interest than Sue.
• D)If both Sue and Neal wait to age 70 to retire, then they will have equal amounts of savings.
• E)Sue will have more money than Neal as long as they retire at the same time.

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Definitions:

Form 8839

A tax form used by U.S. taxpayers to claim qualified adoption expenses, including attorney fees, court costs, and traveling expenses directly related to the legal adoption of a child.

Foreign Tax Credit

A tax credit that offsets the double taxation of income earned abroad, allowing taxpayers to credit foreign taxes paid against their U.S. tax liability.

Taxable Income

The amount of an individual's or corporation's income that is used to determine how much tax is owed to the federal government.

Foreign Income Taxes

Taxes paid to a foreign government for income earned in the foreign country.