Adam plans to invest $1,500 today in a mutual fund. If he earns 12 percent interest...

Adam plans to invest $1,500 today in a mutual fund. If he earns 12 percent interest compounded monthly, the amount his investment will grow to in 20 years is closest to:

Solutions

Expert Solution

Calculate the future value of the investment as follows:

Future value = Present value *(1+ Interest rate )^number of years

= $1,500 * (1+(12%/12))^(12*20)

=$1,500 * (1+1%)^(240)

= $16,338.83

Therefore, the future value is $16,338.83.

Note: Compounding is done monthly, that is why multiplication and division of 12 is done.

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Alternative solution in excel:

Therefore, the future value is $16,338.83.

Note: Compounding is done monthly, that is why multiplication and division of 12 is done.

jeff jeffy answered 1 year ago

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