Question

Question 2 CLO2 P2 June invests RM50,000 in an investment account paying an annual compound interest of 4.5% for five years and the move it into an investment account that pays 6.5% interest compounded annually. How much will June's money have grown at the end of seven years? (10 marks)

Answer 1

June's money will have grown to approximately RM70,672.54 at the end of seven years.

Step-by-step explanation:

Step 1: Calculate the future value after 5 years in the first investment account:

Future Value (FV1) = Principal (P) * (1 + Interest Rate)^Number of Periods

FV1 = RM50,000 * (1 + 0.045)^5 ≈ RM61,655.25

Step 2: Calculate the future value after 2 years in the second investment account:

FV2 = FV1 * (1 + Interest Rate)^Number of Periods

FV2 = RM61,655.25 * (1 + 0.065)^2 ≈ RM70,672.54

Therefore, June's initial investment of RM50,000 will grow to approximately RM70,672.54 after seven years, considering the compound interest earned in both accounts.

Note: This calculation assumes the interest is compounded annually. If the interest is compounded more frequently (e.g., monthly or quarterly), the final amount may be slightly higher.