Question

Linda Roy received a $200,000 inheritance after taxes from her parents. She invested it at 4% interest compounded quarterly for 3 years. A year later, she sold one of her rental properties for $210,000 and invested that money at 3% compounded semiannually for 2 years. Both of the investments have matured. She is hoping to have at least $500,000 in 7 years compounded annually at 2% interest so she can move to Hawaii. Will she meet her goal?

Answer 1

Answer:

Step-by-step explanation:

Matured amount of $200000 at 4% compounded quarterly after 3 years

= $200000 x ( FVIF , 1 , 12 )

= $200000 X 1. 1268

= $225360 .

Matured amount of $210000 at 3% compounded semiannually  after 2 years

= $210000 x ( FVIF , 1.5 , 4 )

= $210000 X 1. 1268

= $225360 x 1.0614

= $239197

Total amount after maturity

= $225360 + $239197

= $464557

Matured amount of $464557  at 2% compounded annually  after 7 years

= $464557  x ( FVIF , 2 , 7 )

= $464557 x 1.1487

= $533636.6

This amount is more than his target amount of 500000.00 So she meets the goal .