Question

You save $15,000.00. You place one-third in a savings account earning a 4.6% APR compounded annually. You then invest one quarter of the remaining balance in a 3-year U.S. Treasury bond earning a 5.2% APR compounded annually and the rest in a stock plan. Your stock plan increases in value 3% the first year, decreases 8% in value the second year, and increases 6% in value the third year. What are the balances for each account by the end of the third year and the total gain on your original saved amount?

Answer 1

Explanation:

Amount in 4.6% acct= 15000*(1/3)= 5000

Amount in bonds = 1/4*15000= 3750

Amount in stock= 15000-(5000+3750)= 6250

Amount in each account at the end of three years

5000*(1.046)^3= 5722.22668

3750*(1.052)^3=4365.94728

6250*1.03*(1-.08)*1.06= 6277.85

total: 5722.22668+4365.94728+6277.85=16366.02396

gain= 16366.02396-15000=1366.02396

or (16366.02396/15000)-1= 9.1068264%