Question
Rocky and Sandy Beach are twins. Each inherits $100,000 from their grandparents. The twins decide to immediately invest their inheritances. They plan to reinvest all
Rocky and Sandy Beach are twins. Each inherits $100,000 from their grandparents. The twins decide to immediately invest their inheritances. They plan to reinvest all dividends and interest that the investments earn and will not make any withdrawals until they retire in 30 years.
Rocky invests in actively managed mutual funds, while his sister, Sandy, invests in index mutual funds. The twins consult with each other a lot, and both end up with highly diversified portfolios of stocks that are similar in risk. Before investment expenses, each of their portfolios earns a 10.0% rate of return, compounded annually. However, Rocky's portfolio has average investment expenses that reduce his annual rate of return by 1.4%, whereas Sandy's portfolio has average investment expenses that reduce her annual rate of return by only 0.1%.
What is the magnitude of the difference in their ending wealth? (That is, what is the magnitude of the dollar difference?)
Give your answer in dollars. Round your answer to the nearest dollar. Do not type the $ symbol. For example, if your answer is $125,400, then type 125400. Enter the magnitude of the difference as a positive number.
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