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27 September, 13:02

MaryJo is considering investing in 2 different mutual funds. Option A has an annual interest rate of 7% and requires a principal of $10,000 with monthly deposits of $200 for 10 years. Option B has an annual interest rate of 9% and requires a principal of $10,000 with monthly deposits of $200 for 5 years.

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  1. 27 September, 13:14
    0
    What is the difference in the final balances of the two mutual funds?

    Step-by-step explanation:

    The difference is $12,400.
  2. 27 September, 13:23
    0
    The option A mutual funds will be more effective.

    Step-by-step explanation:

    Option A:

    Principal amount = $10000

    Monthly deposit = $200

    Time = 10 years

    Rate of interest = 7%

    Total deposit = (200 x 12 x 10) + 10000

    = 24000 + 10000

    = $34000

    Interest = (34000 x 7) / 100

    = 340 x 7

    = $2380

    Total amount = 34000 + 2380

    = $36380

    Option B:

    Principal amount = $10000

    Monthly deposit = $200

    Time = 5 years

    Rate of interest = 9%

    Total deposit = (200 x 12 x 5) + 10000

    = 12000 + 10000

    = $22000

    Interest = (22000 x 9) / 100

    = $1980

    Total amount = 22000+1980

    = $23980

    The option A mutual funds will be more effective.
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