Question

You invested $52,400 at 6% compounded annually for 5 years. What is your total return on this investment?

Answer 1

First you have time multiply 52,400 time .06 to find the amount charged at time compounded times 5 for the amount of times compounded then add that number to 52,400 and get 68,120

Answer 2

Answer

$70,123

Step-by-step explanation:

Data:

Present Value (PV) : 52,400

Interest rate (r) : 6%

Years (n): 5

Formula:

a) $FV=P(\frac{(1+r)^{n}-1 }{r})$

b) $P=\frac{r(PV)}{1-(1-r)^{-n} }$

Replacing the values on the formula (b) we have that

$P=\frac{0.06(52400)}{1-(1-0.06)^{-5} }$ = 12439.57

Now that we know the value of P we can replace it on (a)

$FV=12439.57(\frac{(1+.06)^{5}-1 }{.06})$ = 70,123