Round any decimals to the nearest penny.
You invest $2,000.00 in a stock plan and another $2,000.00 in a savings account. The stock plan decreases by 7% the first year and gains 10% the second year. The savings account earns a 3.7% APR and compounds annually. What is the difference in earnings between the stock and savings account at the end of the second year?
In the first year, the stock plan decreases by 7%, so it is worth 0.93 * $2,000 = $1,860 after the first year.
In the second year, it gains 10%, so it is worth 1.10 * $1,860 = $2,046 after the second year.
The savings account earns 3.7% APR and compounds annually, so after the second year it is worth $2,000 * (1 + 0.037)^2 = $2,077.30.
The difference in earnings between the stock and savings account at the end of the second year is $2,077.30 - $2,046 = $31.30.
Therefore, the difference in earnings between the stock and savings account at the end of the second year is $31.30.