I want to be able to buy a car with cash in years. I have $5000 that I can invest today. ican get a bond earning 6.5%. How much will I have for the purchase?
How many years?
You did not say how many years.
While you are at it, where can I get one of those bonds? Is it insured?
To calculate how much money you will have in a certain number of years, you can use the compound interest formula. The formula is:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the investment
P = the principal amount (initial investment)
r = the annual interest rate (in decimal form)
n = the number of times the interest is compounded per year
t = the number of years
In this case, you have $5000 as the principal amount, 6.5% annual interest rate, and the investment is compounded annually. Let's assume you want to buy a car in 5 years.
Plugging in the values, the formula will become:
A = 5000(1 + 0.065/1)^(1*5)
A = 5000(1 + 0.065)^5
A = 5000(1.065)^5
A ≈ 5000(1.34863)
A ≈ $6743.15
Therefore, after 5 years, your investment of $5000, earning an annual interest rate of 6.5%, will grow to approximately $6743.15.
Please note that this calculation assumes that the bond's interest rate remains constant throughout the investment period, and there are no additional contributions or withdrawals made during the investment period. Additionally, it's important to consider any potential fees or taxes associated with the investment before making a decision.