Question

Compute the future value of $10,000 at an 12 percent interest rate 15, 20, and 30 years into the future. what would the future value be over these time horizons if the interest rate were 6 percent?

Answer 1

Future value 
F=P(1+i)^n
where 
P=present value=10000
i=annual interest rate
n=number of years={15,20,30}


At 12% interest rate, i=0.12,
After 15 years,
$F=P(1+i)^15=10000(1.12)^15=54735.66$
After 20 years, 
$F=P(1+i)^20=10000(1.12)^20=96462.93$
After 30 years, 
$F=P(1+i)^20=10000(1.12)^30=299599.22$

At 6% interest rate, i=0.06,
After 15 years, 
$F=P(1+i)^15=10000(1.06)^15=23965.58$
After 20 years, 
$F=P(1+i)^20=10000(1.06)^20=32071.35$
After 30 years, 
$F=P(1+i)^20=10000(1.06)^30=57434.91$

The results show clearly the power of compounding increases drastically with time.