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Janice plans to save $80 a month, starting today, for 20 years. Kate plans to save $80 a month for 20 years, starting one month from today. Both Janice and Kate expect to earn an average return of 5.5 percent on their savings. At the end of the 20 years, Janice will have approximately ________ more than Janice.
a. $66.67
b. $159.73
c. $78.14
d. $0
e. $189.12

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Answer: b. $159.73

Explanation: At the end of the twenty years, Janice would have approximately $159.73 more than Kate. To solve for this, we calculate the future value of the money saved over the time period for both Janice and Kate, and then take the difference to arrive at the correct answer.

Future Value for Janice = $80 ×{[1 + (.055 / 12)]^240 - 1} / (.055 / 12) × [1 + (.055 / 12)] = $35,009.92

Future Value for Kate = $80 ×{[1 + (.055 / 12)]^240 - 1} / (.055 / 12) = $34,850.19

Difference = $35,009.92 - $34,850.19 = $159.73

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