If money can be invested at 4.5% compounded annually, which is larger: $5,000 now or $8,000 in 10 years?

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- Nov 3rd 2006, 07:22 AMgracyinterest
If money can be invested at 4.5% compounded annually, which is larger: $5,000 now or $8,000 in 10 years?

- Nov 3rd 2006, 07:47 AMCaptainBlack
$5000 now invested at 4.5% will be worth $5000*(1.045)^10 in 10

years time (that you will have $5000*1.045 after 1 year, ($5000*1.045)*1.045 after 2 years and in general $5000*(1.045)^n after n years).

$5000*(1.045)^10=$7764.85<$8000,

so $8000 in 10 years time is worth more than $5000 today invested at

4.5%.

RonL