Question 85608
Investments Suppose $10,000 is invested at an annual rate
of 5% for 10 years. Find the future value if interest is compounded
as follows.
:
Learn the compound interest formula:
A = P{{{(1+(r/n))^nt}}}
Where: A = Final value; P=amt invested; r = interest rate in decimals; n = number of times compounded per year; t = time in years
:
In this problem; P = 10000; r = .05; t = 10 yr
:
a. Annually: n = 1
A = 10000{{{(1+(.05/1))^(10*1)}}}
A = 10000*{{{(1.05)^10}}}
A = 10000 * 1.62889; find (1.05)^10 with good calc
:
A = 16,288.94 value in 10 yrs compounded annually
:
:
b. Quarterly n = 4
A = 10000{{{(1+(.05/4))^(10*4)}}}
A = 10000{{{(1+.0125)^40}}}
A = 10000*{{{(1.0125)^40}}}
A = 10000 * 1.64362; 
:
A = 16436.19 value in 10 yrs compounded quarterly
:
:
See if you can do the last two, using the first two as examples
c. Monthly; n = 12
d. Daily (365 days) n = 365