Find the value of the investment after 11 years.

Question

A person invests $7000 at 2% interest compounded annually for 4 years and then invests the balance (the $7000 plus the interest earned) in an account at 5% interest for 7 years. Find the value of the investment after 11 years.

Answer 1

[7000(1.02)^4]= 7,577.02512 after 4 years

7577.02512(1.05)^7= approximately

$10,661.64 after 4+7=11 years

general formula is A=P(1+r/n)^nt

r= interest rate= .02, then .05

t = years= 4 then 7

n = number of compounding periods per year=1

A= ending amount= 7577, then 10,662 rounded off

P= starting amount= 7,000, then 7577