Question

If you invest $1,000,000 for 10 years, how much will your investment grow to if you can earn 5% p.a. compounding monthly?

Select one:

a. $1,628,894.63

b. $1,647,009.50

c. $1,700,883.22

d. $607,161.04

e. $1,344,556.09

Answer 1

The investment will grow to $1,647,009.50

The answer is option b of the set given.

Detailed calculation as follows:

8 A B C D E 1 Future Value 2 3 Future value of an amount is calculated using the formula FV=P(1+r)^n 4 Where P= Principal (Presen Value), 5 n= number of compounding periods 6 r= Rate of interest per period in decimals 7 All amounts in $ Given that 9 Present Value (P)= 1,000,000 No. of years (N)= 10 10 Rate of interest (% p.a)= R= 5 No. of times compounded a year (t): 121 11 12 Calculations: 13 Formula Cell reference Value 14 Interest rate per period in decimals (r )=R/(100*t) D10/(100*G10) 0.004166667 15 No. of periods (n)= N*t G9*G10 120 16 (1+r)= 1+G14 1.004166667 17 (1+r)^n= G164G15 1.647009498 18 Future value FV= P*(1+r)^n D9*G17 1647009.498 19 Rounded to $1,647,009.50 20