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

First, we need to calculate how much money you put in each account:

40% of $8,500.00 = $3,400.00 (savings account)
60% of $8,500.00 = $5,100.00 (stock plan)

Now, let's calculate the interest earned in the savings account after 2 years:

Amount in savings account after 2 years:
$3,400.00 * (1 + 0.042)^2 = $3,607.98

Now, let's calculate the value of the stock plan after 2 years:
First year: $5,100.00 * (1 - 0.03) = $4,947.00
Second year: $4,947.00 * (1 + 0.075) = $5,318.43

Total value in the stock plan after 2 years = $5,318.43

Now, let's calculate the total gain at the end of the second year for both accounts combined:

Total gain = ($3,607.98 - $3,400.00) + ($5,318.43 - $5,100.00)
Total gain = $207.98 + $218.43
Total gain = $426.41

Therefore, the total gain at the end of the second year for both accounts combined is $426.41.