Question

You are going to deposit $18,000 today. You will earn an annual rate of 2.9 percent for 9 years, and then earn an annual rate of 2.3 percent for 12 years. How much will you have in your account in 21 years

Answer 1

$30,586

Step-by-step explanation:

Using an annuity formula, we will compound at 2.9% for 9 years and the money at the end of year 9 will be used to compound at 2.3% for 12 years.

So compounding formula is:

Future Value = Present Value * (1+r)^n

For compounding at 2.9% for 9 years,

Future Value = $18,000 * (1+2.9%)^9 = $23,281

And now using the money at the end of year 9 to compound at 2.3% for 12 years:

Future Value = $23,281 * (1+2.3%)^9 = $30,586