Question

If $500 is invested now, $1750 in three years, and $2250 five years from now, all at 5 %, what will the total amount be in fifteen years? (8 marks) 3)

Answer 1

Amount invested today $500 will be invested for 15 years, amount invested three years from now $1,750 will remain invested for 12 years and the amount invested five years from now $2,250 will remain invested for 10 years.

Future value after 15 years = Amount invested today x Future value factor (i%, n) + Amount invested three years from now x Future value factor (i%, n) + Amount invested five years from now x Future value factor (i%, n)

= 500 x Future value factor (5%, 15) + 1,750 x Future value factor (5%, 12) + 2,250 x Future value factor (5%, 10)

= 500 x 2.07893 + 1,750 x 1.79586 + 2,250 x 1.62889

= 1,039.46 + 3,142.76 + 3,665

= $7,847.22 (rounded to two decimals) or $7,847 (if rounded to whole number)

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