SOLUTION: Example: (Present Value) Tony is investing $5000 at 6% per annum, compounded quarterly for 3 years. Then, he will invest that amount along with some additional money at 7.25% pe

Question 705339: Example: (Present Value)
Tony is investing $5000 at 6% per annum, compounded quarterly for 3 years. Then, he will invest that amount along with some additional money at 7.25% per anum, compounded monthly for 3 more years so as to have $12500 at the end of six years. How much additional money must he invest?
(I tried using the formula A = P(1+i)^n which is the compound interest formula, but since present value is included, I don't know what to do. The formula that was included is PV = A/(1 + i)^n)
I will appreciate it if you're able to help me.
Answer by solver91311(24713) (Show Source): You can put this solution on YOUR website!

Start with 5000 for 3 years at 6% per annnum compounded quarterly:

Now, if you invested ONLY that amount for an additional 3 years at 7.5% per annum compounded monthly, you would have:

Which is

short of your goal.

So the question becomes what do I need to invest for 3 years at 7.5% per annum compounded monthly to achieve $5018.24? In other words, what is the PV of A = $5018.24, 3 years, 7.5%, monthly:

For this you need:

I'll leave that last little bit of arithmetic to you.

John

Egw to Beta kai to Sigma
My calculator said it, I believe it, that settles it

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