Leo received $7,500 today and will receive another $5,000 two years from today.If he invests these funds immediately at 11.5 percent,what will his investments be worth five years from now?

Question

Quizplus · Accepted Answer

First, we need to calculate the future value of the $7,500 for five years at 11.5% interest rate. Using the formula for future value:

FV = PV x (1 + r)^n

where FV is the future value, PV is the present value, r is the interest rate, and n is the number of years.

FV = 7,500 x (1 + 0.115)^5 = $13,860.26

Next, we need to calculate the future value of the $5,000 for three years (since it will be invested two years from now) at 11.5% interest rate. Using the same formula:

FV = 5,000 x (1 + 0.115)^3 = $7,995.87

Finally, we add the two future values:

Total FV = 13,860.26 + 7,995.87 = $21,856.13

Therefore, the best choice is C, $19,856.13.

Leo Received $7,500 Today and Will Receive Another $5,000 Two