On a whim, you purchased a scratch-off lottery ticket at the gas station. it must have been your lucky day because you won $2,50
1 answer:
Answer: The winnings of $2,500,000 will grow to $3,781,474.31 if it is invested at 3% for 14 years, compounded annually.
Assuming that I'm logical and rational, I will invest the $2,500,000 at 3% for 14 years in an instrument that gives me compound interest that is compounded annually, as that will give me more money as compared to investing at simple interest.
We use the following formula to determine the Future Value of an investment:
where
FV = Future Value of an investment
PV = Present Value of an investment or amount invested
r = rate of interest per period
n = number of compounding periods for which the money is invested.
Since interest is compounded annually, the number of compounding periods is 14.
Substituting the values from the question in the equation above we get,
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