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Math Help - interest

  1. #1
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    interest

    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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  2. #2
    Grand Panjandrum
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    Quote Originally Posted by gracy View Post
    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
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