Question

Your wealthy uncle established a $2,100 bank account for you when you were born. For the first 9 years of your life, the interest rate earned on the account was 4%. Since then, rates have been only 2%. Now you are 23 years old and ready to cash in. How much is in your account

Answer 1

The future value of the account established by the wealthy uncle will be $3,943.86 after 23 years at the two interest rates.

What is future value?

The future value of an amount is the value obtained in the future after compounding at an interest rate.

The future values after years 9 and 23 can be determined using an online finance calculator as follows:

Future Value of $2,100 after 9 years:

N (# of periods) = 9 years

I/Y (Interest per year) = 4%

PV (Present Value) = $2,100

PMT (Periodic Payment) = $0

Results:

FV = $2,988.95

Total Interest $888.95

Future Value of $2,988.95 after 14 years:

N (# of periods) 14 (23 - 9)

I/Y (Interest per year) = 2%

PV (Present Value) = $2,988.95

PMT (Periodic Payment) = $0

Results:

FV = $3,943.86

Total Interest $954.91

Thus, the future value of the account established by the wealthy uncle will be $3,943.86 after 23 years at the two interest rates.

Learn more about future values at brainly.com/question/24703884

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