If you inherited $ 45,000 today and invested all of it in a security that paid a 7 percent rate of return, how much would you have in 25 years?
Compounded Annually?
P = Po(1+r)^25 = 45,000(1+0.07)^25 =
$244,234.47
Simple Interest:
P = Po + Po*r*t = 45,000 + 45000*0.07*25
= $123,750.
To calculate the future value of an investment, you can use the formula for compound interest:
Future Value = Present Value * (1 + Rate)^Time
In this case, the present value (amount inherited) is $45,000, the rate of return is 7% (0.07 as a decimal), and the time period is 25 years. Plugging in these values into the formula, we get:
Future Value = $45,000 * (1 + 0.07)^25
To evaluate this equation, we need to calculate (1 + 0.07)^25 first, which equals approximately 3.8697. Now, we can substitute this value back into the formula:
Future Value = $45,000 * 3.8697
Calculating this, we find that the future value of the investment after 25 years would be approximately $174,637.50.
To calculate the future value of the investment, we can use the compound interest formula:
Future Value = Present Value * (1 + Interest Rate)^Number of Periods
In this case, the present value is $45,000, the interest rate is 7% (or 0.07), and the number of periods is 25 years.
Plugging in the values into the formula:
Future Value = $45,000 * (1 + 0.07)^25
Calculating this equation gives us the future value of the investment after 25 years.