Question

2 year(s) ago, Sang invested 26,253 dollars. He has earned and will earn 14.11 percent per year in compound interest. If Trang invests 68,982 dollars in 1 year(s) from today and earns simple interest, then how much simple interest per year must Trang earn to have the same amount of money in 7 years from today as Sang will have in 7 years from today? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

What is X if X equals the value of investment A plus the value of investment B? Investment A is expected to pay 16,900 dollars in 3 year(s) from today and has an expected return of 16.16 percent per year. Investment B is expected to pay 25,400 dollars in 2 year(s) from today and has an expected return of 9.24 percent per year.

Answer 1

Answer 1st Part:

2 year(s) ago, Sang invested 26,253 dollars

Interest rate = 14.11%

Future value Sang will have in 7 years from today = 26,253 * (1 + 14.11%) ⁹ = $86,117.67

Trang invests 68,982 dollars in 1 year(s) from today and earns simple interest

Simple interest amount per year must Trang earn to have the same amount of money in 7 years from today

= (86117.67 - 68982) / 6

= $2,855.95

Simple Interest rate = 2855.95 / 68982 = 0.0414

Simple Interest rate = 0.0414

Answer 2nd Part:

X = Investment A + Investment B

PV = FV / (1 + Interest rate) ^{Number of years}

Investment A = 16,900 / (1 + 16.16%) ³ = $10,782.436

Investment B = 25,400 / (1 + 9.24%) ² = $21284.837

X = $10,782.436 + $21284.837 = $32067.27

X = $32067.27