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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.

 Nov 21, 2014

Best Answer 

 #1
avatar+118587 
+5

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

 Nov 21, 2014
 #1
avatar+118587 
+5
Best Answer

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

Melody Nov 21, 2014

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