This morning, DJ's invested $225,000 to help fund future projects. How much additional money will the firm have three years from now if it can earn an annual interest rate of 4 percent rather than 3.5 percent?

Question

Quizplus · Accepted Answer

To find the additional money the firm will have, we calculate the future value of the investment at both interest rates and subtract the lower from the higher. At 4% interest, the future value (FV) is calculated using the formula FV = P(1 + r)^n, where P is the principal amount ($225,000), r is the annual interest rate (0.04), and n is the number of years (3). This gives us FV = $225,000 * (1 + 0.04)^3 = $225,000 * 1.124864 = $253,094.40.At 3.5% interest, the future value is FV = $225,000 * (1 + 0.035)^3 = $225,000 * 1.108817 = $249,461.52.The difference between the two future values is $253,094.40 - $249,461.52 = $3,632.88.

This Morning, DJ's Invested $225,000 to Help Fund Future Projects