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An Amount Of 5,000 Is Invested At A Fixed Rate Of 8 Per Cent Per Annum. What Amount Will Be The Value Of The Investment In Five Years Time, If The Interest Is Compounded Annually? |
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Answer» The only part of this type of calculation that NEEDS PARTICULAR care is that concerning the interest rate. The formula assumes that r is a PROPORTION, and so, in this case: r = 0.08 In addition, we have P = 5,000 and n = 5, so: V = P(1 + r)5 = 5,000 x (1 + 0.08)5 = 5,000 x 1.469328 = 7,346.64 Thus the value of the INVESTMENT will be 7,346.64. The only part of this type of calculation that needs particular care is that concerning the interest rate. The formula assumes that r is a proportion, and so, in this case: r = 0.08 In addition, we have P = 5,000 and n = 5, so: V = P(1 + r)5 = 5,000 x (1 + 0.08)5 = 5,000 x 1.469328 = 7,346.64 Thus the value of the investment will be 7,346.64. |
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