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If André invests $2,000 in 3 years’ time, and an additional $5,000 in 6 years’ time,...

If André invests $2,000 in 3 years’ time, and an additional $5,000 in 6 years’ time, how much will he have 8 years from today at an interest rate of 7%, compounded quarterly?

a) $8,530

b) $8,574

c) $8,921

d) $9,903

The answer is B ($8,574) but I would like to know the steps how to get that answer.

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Answer #1

Answer is $8,574

Investment in 3 years = $2,000
Investment in 6 years = $5,000

Annual interest rate = 7.00%
Quarterly interest rate = 7.00% / 4
Quarterly interest rate = 1.75%

Value of investment in 8 years = $2,000 * 1.0175^20 + $5,000 * 1.0175^8
Value of investment in 8 years = $2,830 + $5,744
Value of investment in 8 years = $8,574

So, you will have $8,574 in 8 years from today

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