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You are the lucky winner of your state’s lottery of $5 million after taxes. You invest your winnings in a five-year certificate of deposit
(CD) at a local financial institution.

The CD promises to pay 7 percent per year compounded annually. This institution also lets you reinvest the interest at that rate for the duration of the CD.

How much will you have at the end of five years if your money remains invested at 7 percent for five years with no withdrawals?
in Economics and Finance by Gold Status (10,269 points) | 12 views

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To solve this problem, compute the future value of the \$5 million investment using the following values in Equation 2 :
\mathrm{PV} &=\$ 5,000,000 \\
r &=7 \%=0.07 \\
N &=5 \\
\mathrm{FV}_{N} &=\mathrm{PV}(1+r)^{N} \\
&=\$ 5,000,000(1.07)^{5} \\
&=\$ 5,000,000(1.402552) \\
&=\$ 7,012,758.65
At the end of five years, you will have \$ 7,012,758.65 if your money remains invested at 7 percent with no withdrawals.
by Gold Status (10,269 points)

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