Question

Five years from today, you plan to invest $5,050 for 7 additional years at 7.9 percent compounded annually. How much will you have in your account 12 years from today?

Answer 1

Since the amount will remain invested only for 7 years ( 12 – 5 ), it will be compounded for 7 years

Future Value

= Present Value at end of year 5 x [ ( 1 + Rate of interest ) ^ Number of years]

Where,

Present Value at end of year 5 = $5,050

Rate of interest = 7.9% or 0.079

Years = 7

So, Future Value

= $5,050 x ( 1.079 ^ 7 )

= $5,050 x 1.702747

= $ 8,598.87