Question

Compute the future view of an investment and use your figure in a sentence.

Answer 1

Let us take an investment of $10,000

This is deposited in an account the earns 6% interest compounded annually for 5 years

Now the formula to calculate future value is

I * (1+r)ⁿ

Where I is the investment amount

r is the rate of interest

n is the number of periods

Now the future value is 10,000 * ( 1 + 0.06)⁵

Hence the future value is 10,000 * 1.338226

13382.26

This can be better shown with the below table.

Year	Opening Investment	Compounding factor	Closing Investment
1	10,000	1.060	10,600.0
2	10,600	1.060	11,236.0
3	11,236	1.060	11,910.2
4	11,910	1.060	12,624.8
5	12,625	1.060	13,382.3

In a single sentence we can say that "" AN AMOUNT IF $10,000 INVESTED IN AN ACCOUNT THAT GIVES 6% INTEREST COMPIOUNDED ANNUALLY GIVES US $13,382.3 AT THE END OF YEAR 5""