If 500 is invested now 700 two years from now and 900 four y

If $500 is invested now, $700 two years from now, and $900 four years from now (all at 4%), what will be the total amount in ten years

Solution

$500 has been invested now. This implies it will remain invested for 10 years.

$700 will be invested two years from now. This implies it will remian invested for 8 years.

$900 will be invested four years from now. This implies it will remain invested for 6 years.

Future value of each sum taking into account the time period for which they are invested and interest rate has to be calculated. Total sum of such future values will be the total amount in ten years.

Interest rate = 4% or 0.04

Calculate Total amount -

Total amount = 500*(1+0.04)¹⁰ + 700*(1+0.04)⁸ + 900*(1+0.04)⁶

Total amount = 740 + 959 + 1,134 = $2,833

The total amount in ten years will be $2,833.