How much will the investment be worth at the end of each of the next six years?

Katina Washington is currently employed as a computer programmer by Megatel Company.

Her dream, however, is to start her own computer software firm. To provide cash to start her own business in six years she will invest $10,000 today. She thinks the investment will earn a 12% annual return.

a. How much would Katina have in her account at the end of six years if she earns 12% on the investment? How much of this would be interest earned during the six years?

b. Assume, instead, that Katina has decided she needs $20,000 to begin business. She wants to invest equal amounts at the end of each year for the next six years to accumulate the $20,000 needed at that time.

i. How much must be invested each year, assuming that it earns 12% interest?

ii. How much will the investment be worth at the end of each of the next six years?

iii. How much will Katina have put into the account over the six years?

iv. How much interest will be earned over the six years?

 

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