Answer:
Amount won by Kamran = $21,450
Step-by-step explanation:
This can be calculated using the following 3 steps:
Step 1: Calculation of the amount invested in treasury bonds
Since the limit to the duration of investment is not stated, the amount invested can be calculated using the formula for calculating the present value of a perpetuity as follows:
PV = P / r …………………………………. (1)
Where;
PV = Present value or the amount invested treasury bonds = ?
P = Annual return on his investments = $661.25
r = Annual rate of return = 5%, or 0.05
Substitute the values into equation (1), we have:
PV = $661.25 / 0.05 = $13,225
Step 2: Calculation of the amount deposited in the money market account
From Step 1 above, we have:
Amount invested treasury bonds = $13,225
Since he invests $5000 more in treasury bonds than he deposits in the money market account, the amount deposited in the money market account can be calculated as follows:
Amount deposited in the money market account = Amount invested treasury bonds - $5,000 = $13,225 - $5,000 = $8,225
Step 3: Calculation of the amount won by Kamran
Amount won by Kamran = Amount invested treasury bonds + Amount deposited in the money market account = $13,225 + $8,225 = $21,450
