To determine To calculate: Amount earned more when invested at age of 23, than invested at age of 40. Explanation Given: Amount deposited is $500, interest earned quarterly is 5%. Formula used: A = P ( 1 + i ) n Calculation: The amount earned can be calculated by using the formula: A = P ( 1 + i ) n where A is the future value or amount earned, P is the principal or present value, i is the interest rate per year, and n is the number of years. When the amount is invested at the age of 23 years till the age of 65 of years. So, number of years of investment is 42 years. Here, interest earned is quarterly. So, divide interest rate by 4 and multiplying the number of years by 4. P = $ 500 , i = 0.05 4 and n = 42 × 4 By using above formula: A 1 = P ( 1 + i ) n = $ 500 ( 1 + 0.05 4 ) 42 × 4 = $ 500 ( 1 + 0.0125 ) 168 = $ 500 ( 1.0125 ) 168 Simplifying it further: A 1 = $ 500 ( 1.0125 ) 168 = $ 500 × 8.0605626 = $ 4 , 030.2813 Rounding off to the nearest decimal: A 1 = $ 4 , 030.28 When the amount is invested at the age of 40 years till the age of 65 of years. So, number of years of investment is 25 years

12th Edition

ISBN: 9780135240687

Author: Lial

Publisher: PEARSON

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Chapter 5, Problem 65RE

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To calculate: Amount earned more when invested at age of 23, than invested at age of 40.

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Chapter 5, Problem 64RE

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