Jeff wins $600,000 (after taxes) in the lottery and decides to invest half of it in a 10-year CD that pays 7.25% interest compound

Question

Jeff wins $600,000 (after taxes) in the lottery and decides to invest half of it in a 10-year CD that pays 7.25% interest compounded monthly. He invests the other half in a money market fund that unfortunately turns out to average only 3.2% interest compounded annually over the 10-year period. How much money will he have altogether in the two accounts at the end of the 10-year period?

Answer 1

Lottery money:

A = p(1 + r/n)^nt

A = 600000(1 + 0.0725/12)¹²⁽¹⁰⁾

A = 600000(1 + 0.00625)¹²⁰

A = 600000(1.00625)¹²⁰

A ≈ 600000(2.112064637)

A ≈ 1267238.782

 

Fund money:

Same formula, n = 1