To determine the future value of an investment using compound interest, we can use the formula:
Future Value = Present Value × (1 + interest rate) ^ number of years
Here, the Present Value is $100, the interest rate is 11 percent (or 0.11), and the number of years is 10.
Plugging in these values:
- Future Value = 100 × (1 + 0.11) ^ 10
- Future Value = 100 × (1.11) ^ 10
- Future Value = 100 × 2.83942
- Future Value ≈ 283.94
Therefore, after 10 years, the value of $100, when invested at an annual interest rate of 11 percent, would be approximately $283.94.
This shows the power of compound interest, as the money grows significantly over time. The longer you invest, the more interest you earn, creating a compounding effect that accelerates the growth of your initial investment.