Assume That Two People Save $100 Per Month (The Same

Multiple Choice

Assume that two people save $100 per month (the same for both) and earn exactly the same positive annual interest rate of 2%. Also assume that one of them started saving at 20 years old, while the other started saving at 40 years old. Which statement is correct?

A) On their 60th birthday, the one who started saving later would have exactly half as much as the one who began saving earlier.
B) On their 60th birthday, they would both have the same amount.
C) On their 60th birthday, the one who started saving later would have less than half the amount that the one who began saving earlier has.
D) On their 60th birthday, the one who started saving later would have received a larger real interest rate, but not enough to "catch up" to the one who began saving earlier.
E) On their 60th birthday, neither would have anything if inflation had been negative during the period.