Kendra got a $100,000 signing bonus, and she decided to invest the bonus in a money market account that pays 15% interest compounded yearly. How much will her investment be worth in 20 years? Round the answer to two decimal places.
The formula to calculate the future value of an investment with compound interest is given by:
FV = PV(1 + r)^n
Where:
FV = future value
PV = present value
r = interest rate
n = number of years
In this case, Kendra's initial investment (PV) is $100,000, the interest rate (r) is 15% = 0.15, and the number of years (n) is 20.
Plugging the values into the formula:
FV = 100,000(1 + 0.15)^20
FV = 100,000(1.15)^20
Calculating (1.15)^20:
(1.15)^20 ≈ 7.287
FV ≈ 100,000 x 7.287
FV ≈ 728,700
Therefore, Kendra's investment will be worth approximately $728,700 in 20 years.