Question

If $11,000 is invested in an account for 25 years. Find the value of the investment at the end of 25 years if the interest is:

Answer 1

If $11,000 is invested, $33,000 is the value of the investment at the end of 25 years if the interest is 8% simple interest and $75,333.23 is the value of the investment at the end of 25 years if the interest is 8% compounded annually. This can be obtained by using formulas for simple interest and compound interest.

What is the formulas of simple interest and compound interest?

• Simple interest

A = P(1 +Rt/100) , P = principle amount ,R = rate of interest, t = time(in years)

• Compound interest (annually)

A = P(1 + R/100)^t , P = principal amount, R = rate of interest,                                t = time(in years)

   

What is the value of investment?

Given that,  

P = $11,000 , R = 8%,  t = 25 years

• 8% simple interest

A = P(1 +Rt/100) = $11000(1+\frac{(8)(25)}{100} )$ = $33,000

• 8% compounded annually

A = P(1 + R/100)^t = $11000(1+\frac{8}{100} )^{25}$ = $11000(1.08 )^{25}$ = $75,333.23

Hence If $11,000 is invested, $33,000 is the value of the investment at the end of 25 years if the interest is 8% simple interest and $75,333.23 is the value of the investment at the end of 25 years if the interest is 8% compounded annually.

         

     

Learn more about simple interest and compound interest:

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Question: If $11,000 is invested in an account for 25 years. Find the value of the investment at the end of 25 years if the interest is:

(a) 8% simple interest

(b) 8% compounded annually