You invest $1,000 at 4% compounded daily. Two years later you take the balance and place it into an account earning 4.5% compounded daily. Determine the value of your account three years after the 2nd investment.

Question

You  invest  $1,000 at 4% compounded  daily.  Two  years  later  you  take the balance  and place it  into  an account  earning  4.5% compounded  daily. Determine  the value  of your account  three  years  after  the  2nd investment.

Henry · Answer

P1 = Po(1+r)^n.
r = 0.04/365 = 0.0001096/day.
n = 365Comp./yr. * 2yrs. = 730 Compounding periods.
P1 = 1000(1.0001096)^730 = $1083.28.

P2 = Po(1+r)^n.
Po = P1 = 1083.28.
r = 0.045/365 = 0.0001233.
n = 365Comp./yr. * 3yrs = 1095 Compounding periods.
P2 = Value after 3 yrs. = ?.