Question

If you had invested 60% in the savings account and the rest in the stock plan. You save $8,500.00. You place 40% in a savings account earning a 4.2% APR compounded annually and the rest in a stock plan. The stock plan decreases 3% in the first year and increases 7.5% in the second year. What is the total gain at the end of the second year for both accounts combined?

Answer 1

Let's first calculate the amount invested in each account:

Amount invested in the savings account:
60% of $8,500.00 = 0.60 x $8,500 = $5,100

Amount invested in the stock plan:
$8,500 - $5,100 = $3,400

Now let's calculate the interest earned in the savings account after the first year:

Interest = Principal x Rate
Interest = $5,100 x 0.042 = $214.20

Now, let's calculate the value of the stock plan after the first year:

Value after 1st year = $3,400 - 0.03 x $3,400 = $3,298

Now, let's calculate the value of the stock plan after the second year:

Value after 2nd year = $3,298 + 0.075 x $3,298 = $3,550.65

Now let's calculate the total gain for both accounts combined after the second year:

Total gain = Interest from savings account + Value of stock plan after 2nd year
Total gain = $214.20 + $3,550.65 = $3,764.85

Therefore, the total gain at the end of the second year for both accounts combined is $3,764.85.