Ten years ago, you set aside $1,000 . For the first 6 years, you earned a return of 6 percent per year, but for the following 4 years, that rate of return dropped to 3 percent. How much money do you now have at the end of the 10 years?
What will be an ideal response?
At the end of the first 6 years, you would have $1,000 × (1 + 0.06)6.
After investing that money for an additional 4 years, you will have a total of
[$1,000 × (1.06)6] × (1.03)4= [$1,000 × 1.4185] × 1.1255 = $1,596.56.
A-head: INVESTMENT RETURNS
Concept: Finding the future value at differing interest rates
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