Question

As a teenager, Enrique learned a valuable lesson from his dad, who told him to invest $1,000 at 8 percent interest at age 20 and leave the money alone until age 65. Enrique's dad knew that one strategy used by wealthy people is to exercise self-discipline and never touch a long-term savings plan. Enrique is happy to apply his dad's advice. If his savings account earns a more aggressive 14 percent annual rate of return, Enrique's savings will be worth approximately ________ more by age 68.

Answer 1

Answer: $538,806.50

Explanation:

This question is a compound interest question. If the savings increased at 14% per year then the amount when he is 68 will be;

Future Value = Present Value * ( 1 + Interest Rate ) ^ Years

Years = 68 - 20

= 48

Future Value = 1,000 ( 1 + 14%) ^ 48

= 1,000 * 538.8065

= $538,806.50