Harborview Industrial places $875,000 into a corporate bond fund with a stated annual rate of 7.35%, compounded quarterly for 8 years, but after 5 years the company decides to reinvest the accumulated balance into a different instrument earning 6.8% compounded semi-annually for the remaining 3 years. Calculate the final future value and total interest earned across both investment periods.
Correct Answers
future_value
$1,259,396.96
interest_earned
$384,396.96
Step-by-Step Solution
Compound Interest Formula: FV = P × (1 + r/m)^(m×t) Principal (P): $875,000.00 Annual Rate: 7.35% Compounding: quarterly (m = 4) Total periods (n): 20 Rate per period (r/m): 1.8375% FV = $875,000.00 × (1 + 1.8375%)^20 FV = $875,000.00 × 1.439311 FV = $1,259,396.96 Interest Earned = FV − Principal = $1,259,396.96 − $875,000.00 = $384,396.96