Question

What is the total future value in 40 years of the following cash flows: $10,000 invested today, $25,000 invested in 6 years and 7 months, and $50,000 invested in 15 and 2 months? Use a discount rate .9% monthly.

Answer 1

Total months in 40 years = 40 years * 12 = 480 months

Amount invested today = $10,000

Months on investment = 480 months

Monthly interest rate = 0.9% = 0.009

Future value of $10,000 = $10,000*1.009⁴⁸⁰ = $737,496.12

Amount invested in 6 years and 7 months i.e.79 months = $25,000

Period of investment = 480 months – 79 months = 401 months

Future value of $25,000 = $25,000 * 1.009⁴⁰¹ = $908,442.97

Amount invested in 15 years and 2 months i.e. 182 months = $50,000

Period of investment = 480 months – 182 months = 298 months

Future value of $50,000 = $50,000*1.009²⁹⁸ = $722,000.57

Total future value in 40 years = $737,496.12 + $908,442.97 + $722,000.57 = $2,367,939.76