Compound Interest (LO1) Suppose that the value of an investment in the stock market has increased at an average compound rate of about 5% since 1914. It is now 2016.
If someone invested $1,000 in 1914, how much would that investment be worth today?

The formula for calculating the future value of an invested amount compounded annually at a certain percentage rate (r) over a period of time (t) is given by:

[tex]FV = PV (1+\frac{r}{n})^{nt}\\ where:\\FV = future\ value\\PV = present\ value = \$1000\\r = interest\ rate = 5\%=0.05\\n = number\ of\ compounding\ period\ per\ year\ = 1\\t = time = 1914\ to\ 2016 = 102\\\therefore FV = PV (1+\frac{r}{n})^{nt}\\= FV = 1000 (1+\frac{0.05}{1})^{(1 \times102)}\\= 1000(1.05)^{102}\\FV= 1000 \times 144.98\\FV= \$144,980[/tex]

Compound Interest (LO1) Suppose that the value of an investment in the stock market has increased at an average compound rate of about 5% since 1914. It is now 2016. If someone invested $1,000 in 1914, how much would that investment be worth today?

Respuesta :

Otras preguntas

Compound Interest (LO1) Suppose that the value of an investment in the stock market has increased at an average compound rate of about 5% since 1914. It is now 2016.
If someone invested $1,000 in 1914, how much would that investment be worth today?