An actuary invests 1000 at the end of each year for 30 years. The investments will earn interest at a 4% annual effective interest rate and, at the end of each year, the interest will be reinvested at a 3% annual effective interest rate. Calculate the accumulated value of the investment at the end of the 30-year period. (A) 51,625 (B) 53,434 (C) 55,260 (D) 58,437 (E) 58,938
An actuary invests 1000 at the end of each year for 30 years. The investments will earn interest at a 4% annual effective interest rate and, at the end of each year, the interest will be reinvested at a 3% annual effective interest rate. Calculate the accumulated value of the investment at the end of the 30-year period. (A) 51,625 (B) 53,434 (C) 55,260 (D) 58,437 (E) 58,938
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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An actuary invests 1000 at the end of each year for 30 years. The investments will earn interest at a 4% annual effective interest rate and, at the end of each year, the interest will be reinvested at a 3% annual effective interest rate. Calculate the accumulated value of the investment at the end of the 30-year period.
(A) 51,625 (B) 53,434 (C) 55,260 (D) 58,437 (E) 58,938
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Step 1: interest earned on the investment each yeae
VIEWStep 2: Total value of the investment at the end of each year
VIEWStep 3: interest earned on the reinvested interest each year and reinvested interest to the total value each
VIEWStep 4: Solve to the total value at the end of years:
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