Question

You recently invested $400,000 of your savings in a security issued by a large company. The security agreement pays you 12% per year and has a maturity of five year from the day you purchased it. What is the total cash flow you expect to receive from this investment, if compounded quarterly, separated into the return on your investment?

Answer 1

$722444.49386776

Explanation:

Use Compound Intrest Formula

`a = p(1 + (r)/(n) ) {}^(nt)`

• where p is the original amount.
• R is the amount of percentage compounded
• N is amount of times compounded per year.
• T is how long the interest last.

P is 400,00p

T is 12% or 0.12

N is 4 since it is compounded quarterly

T is 5.

Plug the values in

`400000(1 + (0.12)/(4) ) {}^(20)`

Ypu get

$722444.49386776