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Five years ago, Jane invested $5,000 and locked in an 8 percent annual interest rate for 25 years (end 20 years from now). James can make a 20-year investment today and lock in a 10 percent interest rate. How much money should he invest now in order to have the same amount of money in 20 years as Jane?

Respuesta :

Answer:

invested amount = $5,089.9

Explanation:

given data

invested = $5,000

interest rate = 8%

time = 25 year

interest rate = 10%

time = 20 year

solution

we get here interest amount that is

amount  = invested × [tex](1+r)^{t}[/tex]   .............1

amount    = $5,000 × [tex](1+0.08)^{25}[/tex]

amount  = $34,242.38  

and

now we consider here x amount is invested so here we get invested amount in 20 year with 10 % rate

amount  = invested × [tex](1+r)^{t}[/tex]   .............2

$34,242.38  =  invested × [tex](1+0.10)^{20}[/tex]

invested amount = $5,089.9

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