Question

You are going to deposit $26,000 today. You will earn an annual rate of 6.1 percent for 11 years, and then earn an annual rate of 5.5 percent for 14 years. How much will you have in your account in 25 years?

Answer 1

Total value in the account after 25 years = $105,530.26

Step-by-step explanation:

The value of an amount invested at a certain rate of return for certain number of years where interest compounded annually is known as the future value.

The future value of an investment can be determined using the future value formula. This formula is stated below:

FV = PV × (1+r)^(n)

FV - Future Value , PV- Present Value, r-rate of return, n- number of years

For the first compounding, 6.1% for 11 years

PV - 26,000, r- 6.1% and n- 11

FV = 26,000 × (1.061)^11 = 49,870.367

For the second round of compounding at 5.5% for 14 years

PV - 49,870.367 , r -5.5%, n- 14

FV = 49,870.367× 1.055^14 = 105,530.259

Total value in the account after 25 years = $105,530.26