Question

Megan received a $208,000 inheritance after taxes from her parents. She invested it at 8% interest compounded quarterly for 5 years. A year after receiving the inheritance, she sold one of her rental properties for $218,000 and invested that money at 7% compounded semiannually for 4 years. Both of the investments have now matured. How much money does Megan have totaling both of these investments?

Answer 1

Use the compound interest formula.
A = P*(1 +r/n)^(n*t)
where P is the principal, r is the annual rate, n is the number of compoundings per year, and t is the number of years.

For the first investment, ...
A = 208,000*(1 +.08/4)^(4*5) = 309,077.06

For the second investment, ...
A = 218,000*(1 +.07/2)^(2*4) = 287,064.37

Totaling both investments at maturity, Megan has $596,141.43.