Leo received $7,500 today and will receive another $5,000 two years from today. He will invest these funds when he receives them and expects to earn a rate of return of 11.5 percent. What value does he expect his investments to have five years from today?

Question

Business

Jalen Curry

21 May, 07:05

Leo received $7,500 today and will receive another $5,000 two years from today. He will invest these funds when he receives them and expects to earn a rate of return of 11.5 percent. What value does he expect his investments to have five years from today?

+1

Answers (1)

Know the Answer?

Kianna Ho · Answer 1

Value of Investment = Principal (1+Rate of return) ^Number of periods

For the first investment the principal is 7,500, the rate of return is 11.5% and the number of periods are 5 so the value of the investment will be

7,500 (1+0.115) ^5=12,925

For the second investment the principal is 5,000, the rate of return is 11.5 and the number of periods are 3 as the 5,000 is invested two years from today.

5,000 * (1+0.115) ^3=6,931

Total value of investments = 12,925 + 6,931 = $19,856