Fifteen years ago, you deposited $12,500 into an investment fund. Five years ago, you added an additional $20,000 to that account. You earned 8%, compounded semi-annually, for the first ten years, and 6.5%, compounded annually, for the last five years. Required: a) What is the effective annual interest rate (EAR) you would get for your investment in the first 1O years? " b) How much money do you have in your account today? c) If you wish to have $85,000 now, how much should you have invested 15 years ago.
Fifteen years ago, you deposited $12,500 into an investment fund. Five years ago, you added an additional $20,000 to that account. You earned 8%, compounded semi-annually, for the first ten years, and 6.5%, compounded annually, for the last five years. Required: a) What is the effective annual interest rate (EAR) you would get for your investment in the first 1O years? " b) How much money do you have in your account today? c) If you wish to have $85,000 now, how much should you have invested 15 years ago.
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 24P
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Transcribed Image Text:Fifteen years ago, you deposited $12,500 into an investment fund. Five years ago, you added an
additional $20,000 to that account. You earned 8%, compounded semi-annually, for the first ten years,
and 6.5%, compounded annually, for the last five years.
Required:
a) What is the effective annual interest rate (EAR) you would get for your investment in the first 1O
years? "
b) How much money do you have in your account today?
c) If you wish to have $85,000 now, how much should you have invested 15 years ago.
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