You inherit $145,000 and decide to invest it for 90 days compounded daily at 6%

Question

You inherit $145,000 and decide to invest it for 90 days compounded daily at 6% annual interest. After the 90 days, you are going to invest your new-found money in a startup business. a) How much interest is earned on this investment? You can either use the Future Value formula or Table 13-2 Future Value Formula FV = P(1 + R)N Reminder: R = Interest Rate per period (day) Table 13-2: Compound Interest on $100, Compounded Daily (365 days) (Exact Time, Exact Interest Basis) Reminder - The Table is for compound interest on each $100. b) How much money will you have to invest in the startup after the 90 days?

Explanation / Answer

A) Solution: $2,160.97

Working:

Dividing the loan principal by the table principal = $145,000/100 = $1450

Interest Rate from table 13-2; 90 days @ 6% = $1.490327

Interest = $1,450 * $1.490327 = 2,160.97

B) Solution: $147,160.97

Working: $145,000 + $2,160.97 = $147,160.97

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