Question

Last year, Pat spent $10 a day on miscellaneous things like downloading apps, buying music, and eating out. If Pat had invested that $3650 in a well-diversified investment paying a real return of 7 percent, compounded annually, how much would Pat have in 10 years?

Answer 1

Answer:

Pat would have $7,180.1 in 10 years

Explanation:

Data provided in the question:

Principal or amount of money deposited, P = $3650

Interest rate = 7%

Time, t  = 10 years

for compounded annually,  n = 1

Now,

The Future value (A) using compounding is given by the formula as:

$A = P \left( 1 + \frac{r}{n} \right)^{\Large{n \times t}}$

on substituting the respective values, we get

Amount after 10 years = $3650 × (1 + 0.07)¹⁰

or

Amount after 10 years = $3650 × 1.967151

or

Amount after 10 years = $7,180.1

Pat would have $7,180.1 in 10 years