For the year ending December 31, 2017, sales for Company Y were $61.21 billion. Beginning January 1, 2018 Company Y plans to invest 7.5% of their sales amount each year and they expect their sales to increase by 3% each year over the next three years. Company Y invests into an account earning an APR of 1.8% compounded continuously. Assume a continuous income stream. How much money will be in the investment account on December 31, 2020? Round your answer to three decimal places. billion dollars How much money did Company Y invest in the account between January 1, 2018 and December 31, 2020? Round your answer to three decimal places. billion dollars How much interest did Company Y earn on this investment between January 1, 2018 and December 31, 2020? Round your answer to three decimal places. If intermediate values are used, be sure to use the unrounded values to determine the answer. billion dollars
For the year ending December 31, 2017, sales for Company Y were $61.21 billion. Beginning January 1, 2018 Company Y plans to invest 7.5% of their sales amount each year and they expect their sales to increase by 3% each year over the next three years. Company Y invests into an account earning an APR of 1.8% compounded continuously. Assume a continuous income stream. How much money will be in the investment account on December 31, 2020? Round your answer to three decimal places. billion dollars How much money did Company Y invest in the account between January 1, 2018 and December 31, 2020? Round your answer to three decimal places. billion dollars How much interest did Company Y earn on this investment between January 1, 2018 and December 31, 2020? Round your answer to three decimal places. If intermediate values are used, be sure to use the unrounded values to determine the answer. billion dollars
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![**Investment Growth Analysis for Company Y**
---
**Scenario Description:**
For the year ending December 31, 2017, sales for Company Y were \$61.21 billion. Beginning January 1, 2018, Company Y plans to invest 7.5% of their sales amount each year and they expect their sales to increase by 3% each year over the next three years.
Company Y invests into an account earning an APR of 1.8% compounded continuously. Assume a continuous income stream.
---
**Question 1: Future Value of Investment on December 31, 2020**
How much money will be in the investment account on December 31, 2020?
*Round your answer to three decimal places.*
\[\_\_\_\_\_\_\_\_ billion dollars\]
**Question 2: Total Investment between January 1, 2018 and December 31, 2020**
How much money did Company Y invest in the account between January 1, 2018 and December 31, 2020?
*Round your answer to three decimal places.*
\[\_\_\_\_\_\_\_\_ billion dollars\]
**Question 3: Interest Earned by Investment between January 1, 2018 and December 31, 2020**
How much interest did Company Y earn on this investment between January 1, 2018 and December 31, 2020?
*Round your answer to three decimal places. If intermediate values are used, be sure to use the unrounded values to determine the answer.*
\[\_\_\_\_\_\_\_\_ billion dollars\]
---
**Explanation:**
To calculate the future value of Company Y's investment account on December 31, 2020, continuous compounding must be applied to the annual investments. Each year, a percentage of the sales is invested, and the sales are growing at a constant rate. The formula for continuously compounded interest can be utilized for determining the future value, and additional calculations are necessary to find out the total investment and the interest earned.
**Note:**
Make sure to apply the formula for continuous compounding correctly and round your answers to three decimal places as indicated for accurate results.
---
This analysis emphasizes critical financial planning concepts, including continuous compounding and understanding growth assumptions to evaluate future investments and returns.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbcfa3f98-eb44-4f4d-86d7-8c297108b84f%2F0f1ea23e-31b7-4815-a4d0-35d220b81d6c%2Fx3f174a_processed.png&w=3840&q=75)
Transcribed Image Text:**Investment Growth Analysis for Company Y**
---
**Scenario Description:**
For the year ending December 31, 2017, sales for Company Y were \$61.21 billion. Beginning January 1, 2018, Company Y plans to invest 7.5% of their sales amount each year and they expect their sales to increase by 3% each year over the next three years.
Company Y invests into an account earning an APR of 1.8% compounded continuously. Assume a continuous income stream.
---
**Question 1: Future Value of Investment on December 31, 2020**
How much money will be in the investment account on December 31, 2020?
*Round your answer to three decimal places.*
\[\_\_\_\_\_\_\_\_ billion dollars\]
**Question 2: Total Investment between January 1, 2018 and December 31, 2020**
How much money did Company Y invest in the account between January 1, 2018 and December 31, 2020?
*Round your answer to three decimal places.*
\[\_\_\_\_\_\_\_\_ billion dollars\]
**Question 3: Interest Earned by Investment between January 1, 2018 and December 31, 2020**
How much interest did Company Y earn on this investment between January 1, 2018 and December 31, 2020?
*Round your answer to three decimal places. If intermediate values are used, be sure to use the unrounded values to determine the answer.*
\[\_\_\_\_\_\_\_\_ billion dollars\]
---
**Explanation:**
To calculate the future value of Company Y's investment account on December 31, 2020, continuous compounding must be applied to the annual investments. Each year, a percentage of the sales is invested, and the sales are growing at a constant rate. The formula for continuously compounded interest can be utilized for determining the future value, and additional calculations are necessary to find out the total investment and the interest earned.
**Note:**
Make sure to apply the formula for continuous compounding correctly and round your answers to three decimal places as indicated for accurate results.
---
This analysis emphasizes critical financial planning concepts, including continuous compounding and understanding growth assumptions to evaluate future investments and returns.
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