Question

Problem 11

You are scheduled to receive 13,000 in two years. When you receive it, you will invest it for six more years at 8 percent per year. How much will you have in eight years?

The answer is:

Problem 12

You have 9,000 to deposit. ABC Bank offers 12 percent per year compounded monthly, while King Bank offers 12 percent but will only compound annually. How much will your investment be worth in 10 years at each bank?

The answer is:

Problem 13

You invest 10,000. During the first year the investment earned 20% for the year. During the second year, you earned only 4% for that year.   How much is your original deposit worth at the end of the two years?

Answer 1

Problem 11:-

Here we receive 13,000 in two years. we want to invest 6 more years.

So, effective years for calculation of the amount in the eight year = 8 -2 = 6 years

Amount will you have in 8 years = 13,000 * ( 1 + i)⁶ = 13,000 * (1.08)⁶ = 13,000 * 1.586874

Amount will you have in 8 years = $ 20,629.366198

Problem 12:-

Amount invest in Bank ABC offers 12% compounding monthly :-

Amount will be in 10 years = 9,000 * (1 + i / k)^n*k

Here I = interest rate = 12%

K = number of compounding periods in year = 12

I/k = 12% / 12 = 1%

n = number of years = 10 years

Amount will be in 10 years = 9000 * (1.01)^10*12 = 9000 * (1.01)¹²⁰ = $ 29,703.482051

If you invest amount in bank ABC, After 10 years amount will be = $ 29,703.482051

Amount in invest in King Bank Compounding Annually :-

Amount will be in 10 years = 9,000 * (1 + i )ⁿ

Here I = interest rate = 12%

n = number of years = 10 years

Amount will be in 10 years = 9000 * (1.12)¹⁰ = 9000 * (1.12)¹⁰ = $ 27952.633875

If you invest amount in King Bank, After 10 years amount will be = $ 27,952.633875

Question 13:-

Here we invest 10,000

We earned  20% during first year

Amount at end of the first year = 10,000 * (1.20) = $ 12,000

During second year you earned 4% only

Amount at end of the second year = $ 12000 * (1.04) = $ 12,480