Question

You have $12,500 you want to invest for the next 30 years. You are offered an investment plan that will pay you 7 percent per year for the next 10 years and 9.5 percent per year for the last 20 years. How much will you have at the end of the 30 years? rev: 09_11_2019_QC_CS-179394 Multiple Choice $209,092.54 $190,253.91 $151,018.51 $101,516.38 $119,874.49

Answer 1

Answer:

The total amount that you will have after 30 years=$151,018.50

Explanation:

Step 1: Determine the total amount after the first 10 years

Total amount after the first 10 years can be expressed as;

A=P(1+r)^n

where;

A=Total amount after 10 years

P=Initial investment amount

r=annual interest rate

n=number of years the money is invested

In our case;

P=$12,500

r=7%=7/100=0.07

n=10 years

Replacing;

A=12,500(1+0.07)^10

A=24,589.39

Total amount after the first 10 years=24,589.39

Step 2: Total amount after 30 years

To calculate the total amount for the 30 years, we use 24,589.39 as the initial deposit for the last remaining 20 years;

where;

P=24,589.39

r=9.5%=9.5/100=0.095

n=20 years

Replacing;

A=24,589.39(1+0.095)^20

A=151,018.50

The total amount that you will have after 30 years=$151,018.50