Question

How much will a one time investment of $1000 be when invested at 6% for 40 years and compounded annually. Round your answer to the nearest cent (2 decimal places). You will not be able to bypass this question until you have the correct answer. Do not use commas in your answer.

Answer 1

The one time investment of $1000 would worth $10285.72  after 40 years at 6% rate of return

What is annual compounding?

Annual compounding means that the number of times interest is compounded annually is once, compared to semiannual compounding where the interest on the investment is calculated twice a year.

The worth of the investment after 40 years means its future value after having invested $1000 for 40 years using the below formula for future value of a single cash flow:

FV=PV*(1+r)^N

FV=future worth of investment=unknown

PV=initial investment=$1000

r=rate of return=6%

N=number of years of investment=40

FV=$1000*(1+6%)^40

FV=$1000*1.06^40

FV=$1000* 10.2857179371259

FV=$10285.72

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Answer 2

A one time investment of $1000 when invested at 6% for 40 years compounded annually will be $10285.72.

To calculate the amount a $1000 investment will be when invested at 6% for 40 years compounded annually, we use the formula below

Formula:

• A = P(1+R/100)ⁿ............... Equation 1

⇒ Where:

• A = Amount
• P = Principle
• R = Rate
• n = years

From the question,

⇒ Given:

• P = $1000
• R = 6%
• n = 40 years

⇒ Substitute these values into equation 1

• A = 1000(1+6/100)⁴⁰
• A = 1000(1.06)⁴⁰
• A = 1000×10.28572
• A = $10285.72

Hence, a one time investment of $1000 when invested at 6% for 40 years compounded annually will be $10285.72.

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