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An amount of 1000 is paid into a fund that earns an effective rate of 6%; at the end of each year, the interest plus an additional 100 is withdrawn from the fund. At the end of year 10, the fund is depleted. The annual withdrawals of interest and principal are deposited into fund Y, which earns an effective rate of 9%. What is the accumulated value of the Fund Y at the end of year 10?

Respuesta :

Answer:

The accumulated value of Fund Y is $2,084.67  

Step-by-step explanation:

The $1000 invested in Fund X at 6% per year gave $60 interest at the end of  year 1,when $100 was moved to Fund Y plus the interest $60,leaving a balance of $900.

The movement of interest and $100 from Fund X continued until it is depleted.

However,for instance the $160 moved from Fund X to Y was invested 9% for 9 years giving a future value of $347.50  at the expiration of the tenor.

The same approach applied to other movements from Fund X to Y.

Find attached spreadsheet for detailed calculations

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