Suppose a sum of $40000 is deposited in a bank, with compound interest rate of 5% per annum. What is the total sum (principal + interest) after 25 years? Please show me the formula as well.
Thanks.
FV=PV(1+i)^n
FV=future value = this is what you want to find
PV=present value = $40000
i = interest rate per interest period
n = number of interest period
Here the interest is being compounded yearly at 5% for 25years
so i=0.05, n=25
FV=40000*(1+0.05)^25
=40000*1.05^25
$${\mathtt{40\,000}}{\mathtt{\,\times\,}}{{\mathtt{1.05}}}^{{\mathtt{25}}} = {\mathtt{135\,454.197\: \!635\: \!975\: \!392\: \!668\: \!3}}$$
so it will grow to $135,454.20
FV=PV(1+i)^n
FV=future value = this is what you want to find
PV=present value = $40000
i = interest rate per interest period
n = number of interest period
Here the interest is being compounded yearly at 5% for 25years
so i=0.05, n=25
FV=40000*(1+0.05)^25
=40000*1.05^25
$${\mathtt{40\,000}}{\mathtt{\,\times\,}}{{\mathtt{1.05}}}^{{\mathtt{25}}} = {\mathtt{135\,454.197\: \!635\: \!975\: \!392\: \!668\: \!3}}$$
so it will grow to $135,454.20