You have $18,750 you want to invest for the next 30 years. You are offered an in

Question

You have $18,750 you want to invest for the next 30 years. You are offered an investment plan that will pay you 9 percent per year for the next 15 years and 13 percent per year for the last 15 years.

How much will you have at the end of the 30 years? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

If the investment plan pays you 13 percent per year for the first 15 years and 9 percent per year for the next 15 years, how much will you have at the end of the 30 years? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Explanation / Answer

Firstly, looking at the first case : Principal Amount = $ 18750 Duration : 30 yrs

9% interest for first 15 Yrs, 13% interest for the last 15 Yrs.

Amount to be received in the first 15 yrs = Principle * (1+ Interest rate)^number of years

= 18750*(1+0.09)^15

= $ 68296.55

Amount to be received in the next 15 yrs = 68296.55*(1+0.13)^15

= $ 427145.10

Firstly, looking at the second case : Principal Amount = $ 18750 Duration : 30 yrs

13 % interest for first 15 Yrs, 9 % interest for the last 15 Yrs.

= 18750*(1+0.13)^15

Amount to be received in the first 15 yrs = 117267.60

Amount to be received in the last 15 yrs = 117267.60*(1+0.09)^15

= $ 427145.10

Both ways, amount to be be received at the end of 30 yrs would remain the same.

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