Question

You invest a single amount of $10,000 for 5 years at 10 percent. At the end of 5 years you take the proceeds and invest them for 12 years at 15 percent. How much will you have after 17 years

Answer 1

Answer:

$86,166.31

Explanation:

We use future value (FV) formula as follows:

Step 1: Calculation of amount to have after five years:

Five years FV = $10,000 × (1 + 0.1)^5

                       = $10,000 × (1.01)^5

                       = $10,000 × 1.61051  

Five years FV = $16,105.10  

Therefore, $16,105.10  will be realized after five years.

Step 2: Calculation of amount to have after twelve years:

Twelve years FV = $16,105.10 × (1 + 0.15)^12

                            = $16,105.10 × (1.15)^12

                            = $16,105.10 × 5.35025010547371  

Twelve  years FV = $86,166.31  

Therefore, you will have $86,166.31 after 17 years.