Question

A person lends $2000 for five years at 10% per annum simple interest; then the entire proceeds are an investment for 10 years at 9% per year, compounded annually. How much money will the person have at the end of the entire 15-year period?

Answer 1

Answer: $7,102.09

Step-by-step explanation:

SIMPLE INTEREST :

Final amount(A) =?

Principal (P) =$2000

Time(t) = 5

Rate (r) = 10% = 0.1

Recall;

Final amount on simple interest :

A = P (1 + (r×t) )

$2000 (1 + (0.1 × 5)

$2000 (1 + 0.5)

$2000 × 1.5 = 3000

Then the final amount was invested and compounded annually using the parameters :

Principal(P) = $3,000

Rate(r) =9% = 0.09

Time(t) = 10

Final amount (A) =

Recall :

A = P(1 + r) ^t

A = $3000 ( 1 + 0.09)^10

A = $3000 ( 1.09)^10

A = $3000 × 2.3673636745921

A = $7,102.09