Question

You deposit $10,000 in a bank and plan to keep it there for five years. The bank pays 8% annual interest compounded annually. Calculate the future value at the end of five years.

Answer 1

Answer:

$14,693.28

Explanation:

Data provided in the question:

Amount deposited in the bank = $10,000

Time for which it is kept, n = 5 years

Annual interest rate = 8% compounded annually = 0.08

Now,

The Future value using the formula for compounding is given as:

Future value = Amount deposited × ( 1 + rate )ⁿ

or

Future value = $10,000 × ( 1 + 0.08 )⁵

or

Future value = $10,000 × 1.4693280768

or

Future value = $14,693.28