solve the following problems with interest 6% compounded annually PROBLEMS (a) I
ID: 2601293 • Letter: S
Question
solve the following problems with interest 6% compounded annually
PROBLEMS (a) If $10,000 is invested today, what will its value be after 8 years? of 5 years each year for 10 years, what will be the value at the end of 10 years? u Solve the following problems with interest at 6 percent compounded annually: (b) What single amount must be invested today to produce $20,000 at the end (c) If $1,000 is invested today, and an equal amount is invested at the end of (d) If $1,000 is invested today, and an equal amount is invested at the end of each year for 6 years with no further investment made, what will be the value at the end of 15 years?Explanation / Answer
a). Solution :- Future value = Present value * (1 + Rate of interest)Time period in years
= 10000 * (1 + 0.06)8
= 10000 * (1.06)8
= 10000 * 1.5938
= $ 15938.
Conclusion :- Value of investment after the 8 years = $ 15938.
b). Solution :- Future value = Present value * (1 + Rate of interest)Time period in years
20000 = Present value * (1 + 0.06)5
20000 = Present value * (1.06)5
20000 = Present value * 1.3382
Present value = 20000 / 1.3382
Present value = $ 14945 (approx).
Conclusion :- Amount to be invested on today = $ 14945 (approx).
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