Thread: interest

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

Originally Posted by gracy

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

$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