Question

You invest $1000 today. If that money grows at an annualized rate of 2% for the next 7 months and then at an annualized rate of 16% for the next 3 months after that, how much will your investment grown to by the end of the 2nd period. Assume you made no withdrawals or additional investments.

Answer 1

Compute the monthly rate for first 7 months, using the equation as shown below:

Monthly rate = Annual rate/ 12 months

                      = 2%/ 12 months

                      = 0.16666666666%

Hence, the monthly rate is 0.16666666666%.

Compute the value of investment after 1^st period, using the equation as shown below:

Hence, the value of the investment after 1^st period is $1,011.72516222.

Compute the monthly rate for last 3 months, using the equation as shown below:

Monthly rate = Annual rate/ 12 months

                      = 16%/ 12 months

                      = 1.33333333333%

Hence, the monthly rate is 1.33333333333%.

Compute the value of investment after 2^nd period, using the equation as shown below:

Hence, the value of the investment after 2^nd period is $1,052.7361536.