Question

You deposit $400 in an account earning 2% interest compounded annually. How much will you have in the account in 10 years?

Answer 1

Here we will use the following formula:

FV = PV * (1 + r%)ⁿ

where, FV = Future value, PV = Present value = $400, r = rate of interest = 2%, n= time period = 10

now, putting theses values in the above equation, we get,

FV = $400 * (1 + 2%)¹⁰

FV = $400 * (1 + 0.02)¹⁰

FV = $400 * (1.02)¹⁰

FV = $400 * 1.2189944

FV = $487.60

So, after 10 years, we will have $487.60