Question

Your wealthy uncle established a $2,200 bank account for you when you were born. For the first 8 years of your life, the interest rate earned on the account was 6%. Since then, rates have been only 4%. Now you are 21 years old and ready to cash in. How much is in your account? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

$5.838,52

Step-by-step explanation:

First of all, you have to calculate the future value of your money with a compound interest rate, but initially you have to calculate the first 8 years with the interest rate of 6% so you have to do the next operation:

Future Value= Present Value *(( 1+ interest rate)^(n))

where n represents the number of years

Future Value= 2.200* (( 1+ 6%)^(8))

Future Value 8 year = $3.506,47

Now that you have that value you need to calculate the money generated in the next 13 years with the same formula but with the new amount of money

Future value 21 year= $3.506,47 *(( 1+4%)^(13))

Future value 21 year= $5.838,52

Finally, you can ask to the bank the $5.838,52 cash