Question

The state highway department has condemned Mr. Beamer's farm to build a new highway by-pass. They have already paid $160,000 for the property and have agreed to let Mr. Beamer continue to live in the house until construction on the by-pass actually begins. Due to state budget problems, all highway construction jobs in the region have been suspended indefinitely. Today Mr. Beamer deposits the entire amount paid for the property in an account at an interest rate of 4%, compounded monthly (12 times per year). He plans to use the entire balance in the account to invest in a new home at the time that construction on the by-pass actually begins. How much will Mr. Beamer have to invest in a new home if construction begins 4 years from today

Answer 1

The invested amount is $187,412.68

Step-by-step explanation:

The computation of the amount that have to invested is shown below:

Amount = Paid amount × (1 + rate of interest)^number of years

where,

The Paid amount is $160,000

rate of interest is 4% ÷ 12 = 0.33%

And, the number of years is = 4 × 12 = 48

Now the invested amount is

= $160,000 × (1 + 0.33%)^48

= $187,412.68

Hence, the invested amount is $187,412.68