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amm1812
3 years ago
12

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 v

alue be over these time horizons if the interest rate were 6 percent?
Business
1 answer:
Anestetic [448]3 years ago
6 0
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.
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