Sam buys $2,000 worth of stock in a company. He expects the value of the stock to increase by 6% each year.
What is Sam's stock's value 5 years after he purchases the stock.
a) f(5) = $3.1250,000
b) f(5) = $11.013.82
c) f(5)= $2.676.45
d) f(5)= $15.552.000
The formula to calculate the future value of an investment with compound interest is:
FV = PV * (1 + r)^n
Where:
FV = Future Value
PV = Present Value
r = annual interest rate
n = number of years
In this case, Sam's initial investment is $2,000, the interest rate is 6%, and the investment period is 5 years. Plugging in the values, we get:
FV = $2,000 * (1 + 0.06)^5
FV = $2,000 * (1.06)^5
FV = $2,000 * 1.338225
FV = $2,676.45
Therefore, Sam's stock value 5 years after he purchases the stock is $2,676.45.
c) f(5) = $2,676.45