You have $25,000 you want to invest for the next 30 years. You are offered an in

Question

You have $25,000 you want to invest for the next 30 years. You are offered an investment plan that will pay you 5 percent per year for the next 15 years and 8 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 8 percent per year for the first 15 years and 5 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).)

You have $25,000 you want to invest for the next 30 years. You are offered an investment plan that will pay you 5 percent per year for the next 15 years and 8 percent per year for the last 15 years.

Explanation / Answer

1. For first 15 years

The value at the end of 15 years = 25,000 * CVF(5%,15)

= 25,000 * 2.079 = 51,975.00

At the end of 30 years = 51,975 * CVF(8%,15)

= 51,975 * 3.172 = $164,864.70 (Answer)

2. If the investment plan pays you 8 percent per year for the first 15 years and 5 percent per year for the next 15 years

The value at the end of 15 years = 25,000 * CVF(8%,15)

= 25,000 * 3.172 = 79,300.00

At the end of 30 years = 79,300.00 * CVF(5%,15)

= 79,300.00 * 2.079 = $164,864.70 (Answer)

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