Question

You are going to deposit $21,000 today. You will earn an annual rate of 4.1 percent for 15 years, and then earn an annual rate of 3.5 percent for 18 years. How much will you have in your account in 33 years?

Answer 1

Answer:

$71,720.

Explanation:

We can find the answer by finding the future value for the two periods (the 15 years under 4.1% interest rate, and the 18 years under 3.5% interest rate) using the future value of an investment formula:

FV = PV (1 + i)^n

Where:

• FV = Future value
• PV = Present value
• i = interest rate
• n = number of compounding periods

Now, for the first period of time, we plug the amounts into the formula:

FV = $21,000 (1 + 0.041)^15

FV = $38,369

Now, we take that result, and apply the same formula:

FV = $38,369 (1 + 0.035)^18

FV = $71,270

So, the total amount you will have in your account after 33 years is $71,720.