Question

You invest a single amount of $15,000 for 4 years at 11 percent. At the end of 4 years you take the proceeds and invest them for 15 years at 18 percent. How much will you have after 19 years? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Future value

Answer 1

First we will calculate the proceeds after 4 years by the following future value formula:

FV = PV * (1 + r%)ⁿ

where, FV = Future value or proceeds, PV = Present value = $15000, r = rate of interest = 11%, n= time period = 4

now, putting theses values in the above equation, we get,

FV = $15000 * (1 + 11%)⁴

FV = $15000 * (1 + 0.11)⁴

FV = $15000 * (1.11)⁴

FV = $15000 * 1.51807041

FV = $22771.05615

So, proceeds after 4 years will be $22771.05615

Now, we will calculate the the amount after next 15 years by using the same formula as per below:

FV = PV * (1 + r%)ⁿ

where, FV = Future value or proceeds, PV = Present value = $22771.05615, r = rate of interest = 18%, n= time period = 15

now, putting theses values in the above equation, we get,

FV = $22771.05615 * (1 + 18%)¹⁵

FV = $22771.05615 * (1 + 0.18)¹⁵

FV = $22771.05615 * (1.18)¹⁵

FV = $22771.05615 * 11.973747886

FV = $272654.89

So, future value after 19 years will be $272654.89.