Question

four years ago, tom had $17,200 in his account. in 5 years fron today he expects to have $41,600. If he has earned and expects to earn the same return each year from 4 years ago to 5 years from today, then how much does he have today?

A. $25,468

B. $28,044

C. $28,094

D. $11,616

E none are within $20 of the tight andwrt

Answer 1

Option A

$17200 grew from four years ago to $41600, 5 years from now that is in nine years.

Future value=Present value*(1+interest)^number of years

Hence, $41600=$17200(1+interest)^9

or, $17200(1+interest)^9=$41600

or, (1+interest)^9=41600/17200

or, 1+interest=(2.4186)^(1/9)

or,1+ interest=1.1031

or, Interest=1.1031-1

or, Interest=0.1031

or, Interest=10.31%

Value of account now=$17200(1.1031)^4=$17200*1.480674=$25467.60=$25468(approx.)