Question

Five years from today, you plan to invest $2,500 for 7 additional years at 8.4 percent compounded annually. How much will you have in your account 12 years from today?

Answer 1

Five years from today, 2500 $ will be invested for 7 years.

This means interest compounded on the deposit will be for 7 years (as today nothing is invested. First investment done after 5 years)

Interest received = 8.4 % compounded annually.

Future value can be calculated with the help of below formula-

FV = P ( 1 + r ) ⁿ

where,

FV = future value (ending amount)

P = Amount invested

r = rate of interest

n = no. of years

Here,

P = 2500 $, n = 7 years , r = 8.4 %

FV = 2500 ( 1 + 0.084)⁷

FV= 2500 ( 1.084)⁷

FV = 2500 * 1.75875350286316

FV = 4396.883757

Amount that will be in account after 12 years = $ 4396.88

Hope it helps!