Question

ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%21 iSavedYou are scheduled to receive $27,000 in two years. When you receive it, you will invest itfor 6 more years at 4.5 percent per year. How much will you have in 8 years?

Answer 1

Explanation

From the statement, we know that:

• you will receive $27,000 in two years,

,

• once you have the money, you will invest it for six more years at 4.5%/year.

1) For the first two years you won't have any interest.

2) For the six next year, the money will generate interest. The compounded interest is given by:

$M=M_0\cdot(1+r)^N=\text{\ 27,000}\cdot(1+0.045)^6\cong\text{\ 35,161.02.}$

Where:

• M₀ = is the initial amount of money = $27,000,

,

• r = is the interest rate in decimals = 4.5% = 4.5/100 = 0.045,

,

• N = is the number of years = 6 years.

Answer

After 8 years you will have $35,161.02.