You buy 100 shares of company's stock at $9.75/share and place the same amount in a savings account earning 4.5% APR. The stock gains 8% in the first year. What is the difference in total value between your stocks and savings account by th eend of the first year? Round to the nearest penny

Answer 1

To calculate the difference in total value between the stocks and the savings account by the end of the first year, we first need to determine the value of each investment after one year.

Stocks:

1. Initial Cost of Stocks: \[ 100 \text{ shares} \times $9.75/\text{share} = $975 \]

2. Value of Stocks after One Year: \[ \text{Value after 8% gain} = $975 \times (1 + 0.08) = $975 \times 1.08 = $1053.00 \]

Savings Account:

1. Initial Deposit in Savings Account: \[ $975 \]

2. Value of Savings Account after One Year: \[ \text{Final Amount} = $975 \times (1 + 0.045) = $975 \times 1.045 = $1019.875 \]

Calculating the Difference:

Now, we will find the difference in value between the stocks and the savings account after one year. \[ \text{Difference} = \text{Value of Stocks} - \text{Value of Savings Account} = $1053.00 - $1019.875 \] \[ \text{Difference} = $33.125 \]

Rounding to the nearest penny, the difference is: \[ \text{Difference} = $33.13 \]

Final Answer: The difference in total value between your stocks and your savings account by the end of the first year is $33.13.