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Ten years ago, you invested $8,000 in IBM stock, which grew at an annual rate of 10% during that time. You wish to withdraw the money today and invest in Google stock, which is expected to earn 14% per year for the next ten years. How much money will you have 10 years from now?

a. $126, 351.22
b. $76, 924.62
c. $51, 244.35
d. $29, 657.77

Respuesta :

pedrocarratore

Answer:

b. $76, 924.62

Explanation:

The original $8,000 IBM stock investment, for 10 years, at an annual rate of 10%, has a current value of:

[tex]PV = C*(1+r)^n\\PV = \$8,000*(1+0.10)^{10}\\PV=\$20,749.94[/tex]

Investing that amount on Google stock, for 10 years, at an annual rate of 14% will yield a future value of:

[tex]FV = PV*(1+r)^n\\FV = \$20,749.94*(1+0.14)^{10}\\FV=\$76, 924.62[/tex]

You will have $76, 924.62, 10 years from now.

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