Answer:
After 20 years you will have "$87,784.99" and after 30 years you will have "$41,151.55".
Explanation:
The give values are:
After 25 years,
Cash Flow per period,
C = $120
Interest rate per period,
i = [tex]\frac{6.35 \ percent}{12}[/tex]
= [tex]0.52916667 \ percent[/tex]
Number of period,
n = [tex]25\times 12[/tex]
= [tex]300[/tex]
The future value will be:
= [tex]C\times \frac{ [(1+i)^n-1]}{i}[/tex]
On substituting the given values, we get
= [tex]\frac{120[ (1+0.0052916667)^{300} -1]}{0.0052916667}[/tex]
= [tex]120[\frac{(4.8711 -1)}{0.0052916667} ][/tex]
= [tex]87,784.99[/tex] ($)
After 30 years,
Cash Flow per period,
C = $120
Interest rate per period,
i = [tex]\frac{6.35 \ percent}{12}[/tex]
= [tex]0.52916667 \ percent[/tex]
Number of period,
n = [tex]30\times 12[/tex]
= [tex]360[/tex]
The future value will be:
= [tex]C\times \frac{ [(1+i)^n-1]}{i}[/tex]
On substituting the given values, we get
= [tex]\frac{120[ (1+0.0052916667)^{360} -1] }{0.0052916667}[/tex]
= [tex]\frac{120[ (1.0052916667)^{360} -1]}{0.0052916667}[/tex]
= [tex]120[\frac{(6.6857 -1)}{0.0052916667} ][/tex]
= [tex]128,936.54[/tex] ($)
Thus
You will have:
= [tex]128936.54-87784.99[/tex]
= [tex]41151.55[/tex] ($)
