If the present value of my investment is $2,500 and the rate of interest is 2% compounded annually, what will the value be after 15 years?
$3,364.67
$3,306.25
$3,250
$3,047.49
Explanation:
Use the formula:
FV = PV × (1 + r)n
Substitute PV = $2,500, r = 2% = 0.02 and n = 15
FV = $2,500 × (1 + 0.02)15 = $2,500 × (1.02)15
= $2,500 × 1.34586...
= $3364.6708...
So the value after 6 years = $3,364.67
Use the formula:
FV = PV × (1 + r)n
Substitute PV = $2,500, r = 2% = 0.02 and n = 15
FV = $2,500 × (1 + 0.02)15 = $2,500 × (1.02)15
= $2,500 × 1.34586...
= $3364.6708...
So the value after 6 years = $3,364.67