Question

if you make a one-time investment of $500 at 8% interest compounded annually, how much money will you have in 20 years? 50 years?

Answer 1

The formula for annually compounded interest is as follows:

$A = P(1 + r)^t$

P is the initial amount you invest, r is the interest rate as a decimal, and t is the number of years the money will have been invested.

Convert the 8% interest rate into a decimal by dividing by 100:

$8 \div 100 = 0.08$

We now have all of our values. Plug the known values into the equation:

$P = 500, r = 0.08$

$t = 20$

$500(1+0.08)^{20} = 500(1.08)^{20} = \boxed{2330.48}$

$t = 50$

$500(1+0.08)^{50} = 500(1.08)^{50} = \boxed{23450.81}$