Question

Five years ago, Jane invested $5,000 and locked in an 8 percent annual interest rate for 25 years (end 20 years from now). James can make a 20-year investment today and lock in a 10 percent interest rate. How much money should he invest now in order to have the same amount of money in 20 years as Jane?

Answer 1

invested amount = $5,089.9

Step-by-step explanation:

given data

invested = $5,000

interest rate = 8%

time = 25 year

interest rate = 10%

time = 20 year

solution

we get here interest amount that is

amount = invested ×
`(1+r)^(t)` .............1

amount = $5,000 ×
`(1+0.08)^(25)`

amount = $34,242.38

and

now we consider here x amount is invested so here we get invested amount in 20 year with 10 % rate

amount = invested ×
`(1+r)^(t)` .............2

$34,242.38 = invested ×
`(1+0.10)^(20)`

invested amount = $5,089.9