To What Amount Will the Following Investment Accumulate: $5,000 Invested for 10 Years at 10 Percent Compounded Annually?

To determine the future value of an investment, we can use the formula for compound interest:

Formula:

A = P(1 + r/n)^(nt)

Where:

  • A = the future value of the investment/loan, including interest
  • P = the principal investment amount ($5,000)
  • r = annual interest rate (decimal) (10% or 0.10)
  • n = number of times that interest is compounded per year (1 for annually)
  • t = the number of years the money is invested for (10 years)

Plugging in the values:

A = 5000(1 + 0.10/1)^(1*10)

A = 5000(1 + 0.10)^10

A = 5000(1.10)^10

A = 5000 * 2.5937424601

A = 12,968.71

So, the investment of $5,000 at a 10% annual interest rate compounded annually will grow to approximately $12,968.71 in 10 years.

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