Find the future value one year from now of a $7,000 investment at
a 3 percent annual compound interest rate. Also calculate the future
value if the investment is made for two years.
Pt = Po(1+r)^n.
r = 3%/100% = 0.03 = APR expressed as a decimal.
n = 1comp/yr * 1yr = 1 = # of compound-
ing period.
Pt = 7000(1.03)^1 =
Pt = 7000(1.03)^2 =
To find the future value of an investment after one year with a 3 percent annual compound interest rate, you can use the following formula:
Future Value = Present Value * (1 + Rate)^Time
where:
Present Value = $7,000
Rate = 3% or 0.03 (expressed as a decimal)
Time = 1 year
Plugging in these values, we get:
Future Value = $7,000 * (1 + 0.03)^1
= $7,000 * (1.03)
= $7,000 * 1.03
= $7,210
Therefore, the future value of the $7,000 investment after one year is $7,210.
To calculate the future value after two years, we need to adjust the time value to 2 years:
Future Value = $7,000 * (1 + 0.03)^2
= $7,000 * (1.03)^2
= $7,000 * 1.0609
= $7,425.30
Therefore, the future value of the $7,000 investment after two years is $7,425.30.
To find the future value of an investment, we can use the formula for compound interest:
Future Value = Principal * (1 + Interest Rate)^Number of Periods
For the first part of the question, where the investment is made for one year:
Principal = $7,000
Interest Rate = 3% = 0.03
Number of Periods = 1
Using the formula, we can calculate the future value as follows:
Future Value = $7,000 * (1 + 0.03)^1
Future Value = $7,000 * (1.03)
Future Value = $7,210
Therefore, the future value of the $7,000 investment after one year at a 3% annual compound interest rate would be $7,210.
For the second part of the question, where the investment is made for two years:
Principal = $7,000
Interest Rate = 3% = 0.03
Number of Periods = 2
Using the formula, we can calculate the future value as follows:
Future Value = $7,000 * (1 + 0.03)^2
Future Value = $7,000 * (1.03)^2
Future Value = $7,000 * (1.0609)
Future Value = $7,426.30
Therefore, the future value of the $7,000 investment after two years at a 3% annual compound interest rate would be approximately $7,426.30.