Question

Ten years ago, you invested $8,000 in IBM stock, which grew at an annual rate of 10% during that time. You wish to withdraw the money today and invest in Google stock, which is expected to earn 14% per year for the next ten years. How much money will you have 10 years from now?

a. $126, 351.22
b. $76, 924.62
c. $51, 244.35
d. $29, 657.77

Answer 1

b. $76, 924.62

Step-by-step explanation:

The original $8,000 IBM stock investment, for 10 years, at an annual rate of 10%, has a current value of:

`PV = C*(1+r)^n\\PV = \$8,000*(1+0.10)^(10)\\PV=\$20,749.94`

Investing that amount on Google stock, for 10 years, at an annual rate of 14% will yield a future value of:

`FV = PV*(1+r)^n\\FV = \$20,749.94*(1+0.14)^(10)\\FV=\$76, 924.62`

You will have $76, 924.62, 10 years from now.