Question

You have $18,000 you want to invest for the next 36 years. You are offered an investment plan that will pay you 8 percent per year for the next 18 years and 12 percent per year for the last 18 years.

a.	How much will you have at the end of the 36 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b.	If the investment plan pays you 12 percent per year for the first 18 years and 8 percent per year for the next 18 years, how much will you have at the end of the 36 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

a. account value ______

b. account value _______

Answer 1

We use the formula:  
A=P(1+r/100)^n
where   
A=future value
P=present value  
r=rate of interest
n=time period.

a.A=18000*(1.08)^18*(1.12)^18

=18000*30.7292533

=$553126.56(Approx)

b.A=18000*(1.12)^18*(1.08)^18

=18000*30.7292533

=$553126.56(Approx)