Problema Solution
In 2001, a sum of $4000 is invested at a rate of 6.5% per year for 5 years.
a) what is the vale of the investment when it matures?
b) when will the investment be worth $1,000,000
Answer provided by our tutors
P = $4,000 the principal
t = 5 years
r = 0.065 or 6.5% annual rate
A = future value (the money available on the maturity date)
A = P(1 + r)^t
a) what is the vale of the investment when it matures?
A = 4000(1 + 0.065)^5
A = $5,480.35
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b) when will the investment be worth $1,000,000
we need to find t such that 4000(1 + 0.065)^t = 1,000,000
t = 87.68 years
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after 87.68 years the investment will be 87.68 years old.