Question

Karen made an investment of $2500 two years ago to go on a trip. She invested...

Karen made an investment of $2500 two years ago to go on a trip. She invested the money at 7.2% per annum compounded semi-annually. Her investment will mature in three years. Dwayne would also like to go on the trip. However, he hasn’t started saving yet. How much must he invest today at 9.6% per annum compounded monthly to have the same amount as Karen will have three years from now?

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Answer #1

The value of the investment made by Karen is found using future value of investment equation.

Future value of investment made by Karen = $ 3560.72

The amount that Dwayne should invest today is found as follows

The amount that Dwayne must invest today =  $2,672.75

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