Determine the future value of a $25000 investment at an annual rate of 4.85% compounded quarterly for 6 years.
what is 25000(1 + .0485/4)^24 ?
To determine the future value of an investment, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A is the future value
P is the principal amount (the initial investment)
r is the annual interest rate (expressed as a decimal)
n is the number of times the interest is compounded per year
t is the number of years
In this case, the principal (P) is $25000, the annual interest rate (r) is 4.85% or 0.0485, the interest is compounded quarterly, so n = 4, and the investment is held for 6 years (t = 6).
Plugging in the values into the formula:
A = 25000(1 + 0.0485/4)^(4*6)
= 25000(1 + 0.012125)^(24)
= 25000(1.012125)^(24)
≈ 25000(1.3615833)
≈ $34,039.58
Therefore, the future value of a $25000 investment at an annual rate of 4.85% compounded quarterly for 6 years would be approximately $34,039.58.