If you invest $500 in a bank where you will earn 8% compounded annually, how much will it be worth after 7 years?
To find out how much your investment will be worth after 7 years at an 8% compounded annually, you can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the investment
P = the principal amount (initial investment) = $500
r = annual interest rate (in decimal form) = 8% = 0.08
n = number of times interest is compounded per year = 1 (since it is compounded annually)
t = number of years = 7
Now, let's substitute these values into the formula:
A = 500(1 + 0.08/1)^(1*7)
Simplifying further:
A = 500(1 + 0.08)^7
Using a calculator or performing the calculation manually, we get:
A ≈ 500(1.08)^7
A ≈ $735.05
Therefore, your investment will be worth approximately $735.05 after 7 years.