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18 July, 02:17

Which of the following comes closest to the value at the end of year 6 of investing $600 today (year 0) and then investing another $600 at the end of year 5 if the interest rate is 3%?

a. $ 1,434

b. $ 1,334

c. $ 1,542

d. $ 1,383

e. $ 1,487

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Answers (1)
  1. 18 July, 03:07
    0
    The correct answer is B.

    Explanation:

    Giving the following information:

    Investment = $600 today and $600 at the end of year 5

    Interest rate = 3%

    To calculate the final value, we need to apply the following formula on each investment:

    FV = PV * (1+i) ^n

    FV = 600 * (1.03^6) = $716.43

    FV = 600 * (1.03^1) = $618

    Total FV = $1,334.43
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