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Brooke invested $16,700 in a mutual fund at 2.8% compounded monthly.
After 2 years, the interest rate was changed to 8.6% compounded quarterly.
a) How much was the value of the fund 5 years after the rate change? $
b) How much was the total compound interest earned during the whole term?
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First two years (first term), the fund works according to this formula
FV = .
Next five years (the second term), the fund works according to this formula
FV= ,
where A is the amount deposited at the second term.
Since the output from the first term is the input for the second term, you can combine the formulas
to calculate the answer after two terms in one formula
FV = .
After that, you can copy-paste this formula into a calculator which accepts formulas
(for example, Excel spreadsheet or online free of charge calculator www.desmos.com/calculator) and get the answer in one click.
ANSWER to question (a). 27025.64 dollars.
ANSWER to question (b) is the difference $27025.64 - $16700 = $10325.64.
Solved.
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To see many other similar (and different) solved problems on compounded interest accounts, look into the lesson
- Compounded interest percentage problems
in this site.
Learn the subject from there.
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Be aware: calculations and the answer in the post by @Theo are incorrect.
