Clive & Co. will deposit $2 million at the end of each of the next three...

Clive & Co. will deposit $2 million at the end of each of the next three years in a structured product expecting to pay 9% interest. Clive and Co. currently has $800,000 in the trust. How much will Clive & Co. have in 3 years?

Expert Solution

Clive and Co. Currently has $800,000.

Clive & Co.will invest $2 million at the end of each year in next 3 years.

interest rate - 9%

First investment will be made at the end of year one.

so, the first investment of 2 million will get interest for 2 years

Interest for the first investment of 2 million = 2million * (1+0.09)^^2years = 2.38 million

2nd investment will be made at the end of year two.

so, the 2nd investment of 2 million will get interest for 1 year.

Interest for 2nd investment of 2 million = 2million * (1+0.09)^^1years = 2.18 million

3rd investment will be made at the end of year three.

So, it will not fetch any interest as it is the 3rd year ending =2 million

Total amount in the hands of Clive & Co. has at the end of 3 years = 0.8 million + 2.38 million + 2.18 million + 2 million

= 7.36 million

Assumptions: Compounding done at every year and the amount in trust will not fetch any interest.

The Clive & Co. will have 7.36 million at the end of 3 years

jeff jeffy answered 1 year ago

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