Your parents are scheduled to receive $18,500 in three years asa retirement bonus. When they...

Your parents are scheduled to receive $18,500 in three years as a retirement bonus. When they receive the bonus, they have decided to reinvest it for nine more years at an annual rate of 9.25 percent.

How much will the bonus be worth in twelve years time?(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Expert Solution

Future Value:

Future Value is Value of current asset at future date grown at given int rate or growth rate.

FV = PV (1+r)^n
Where r is Int rate per period
n - No. of periods

As the Bonus will be received after 3 Years, It will be invested for 9 Year only. Hence Periods is considered.

Particulars	Amount
Present Value	$ 18,500.00
Int Rate	9.2500%
Periods	9

Future Value = Present Value * ( 1 + r )^n
= $ 18500 ( 1 + 0.0925) ^ 9
= $ 18500 ( 1.0925 ^ 9)
= $ 18500 * 2.2171
= $ 41017.08

Value of retirement bonus after 12 Years is $ 41017.08

jeff jeffy answered 3 years ago

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