From the statement, we know that:
• you will receive $27,000 in two years,
,• once you have the money, you will invest it for six more years at 4.5%/year.
1) For the first two years you won't have any interest.
2) For the six next year, the money will generate interest. The compounded interest is given by:
[tex]M=M_0\cdot(1+r)^N=\text{\$27,000}\cdot(1+0.045)^6\cong\text{\$35,161.02.}[/tex]Where:
• M₀ = is the initial amount of money = $27,000,
,• r = is the interest rate in decimals = 4.5% = 4.5/100 = 0.045,
,• N = is the number of years = 6 years.
AnswerAfter 8 years you will have $35,161.02.
