Question

What is the future value of $80,000 received today, after 14 years if it is invested at 8% compounded annually for the next five years and 3%, compounded annually for the remaining nine years?

Multiple Choice

• $171,022

• $158,098

• $144,772

• $134,567

• $153,371

Answer 1

Solution:
	Answer is 5th option $153,371
Working Notes:
	C0 = Investment = $35,000
	FV=Future worth of the investment after 14 years =??
	r1=rate of interest = 8% compounded annually for five years n1=5
	r2=rate of interest = 3% compounded annually for five years n2=9
	Using future value formula
	FV= C0 x (1+r1)^n1 x (1+r1)^n1
	Fv=80,000 x (1 + 0.08)^5 x (1 + 0.03)^9
	FV = $153,371.1898
	FV = $153,371
Please feel free to ask if anything about above solution in comment section of the question.