Question

You have $12,500 you want to invest for the next 30 years. You are offered an investment plan that will pay you 7 percent per year for the next 10 years and 9.5 percent per year for the last 20 years. How much will you have at the end of the 45 years?

Please provide an Office Excel formula in your answer.

Answer 1

We need to calculate future values for 2 time periods.first one is for 10 years at 7% and second one is for 35 years at 9.5%.

Question didn't mention whether the investment will keep earning 9.5% interest for years 31 to 45. I'm assuming investment will keep earning interest at 9.5% for years 31 to 45.

Future value at the end of 10 years will become present value for years 11 - 45.

You will have $589,171.81 at the end of the 45 years. If Investment doesn't earn any interest for year 31 to 45 then you will have $151,018.51 at the end of the 45 years.

Present value	$12,500
Period (in years)	10
interest rate	7%
interest payment	$0
Future value	$24,589.39
Present value	$24,589.39
Period (in years)	35
interest rate	9.5%
interest payment	$0
Future value	$589,171.81

Formulas

Present value	$12,500
Period (in years)	10
interest rate	7%
interest payment	$0
Future value	$24,589.39
Present value	$24,589.39
Period (in years)	20
interest rate	9.5%
interest payment	$0
Future value	$151,018.51