compute the amount that a 20,000 investment today would accumulate at 10% (compound interest) by the end of 6 years.
To compute the amount that a $20,000 investment would accumulate at 10% compound interest over 6 years, you can use the formula for compound interest:
A = P * (1 + r/n)^(n*t)
Where:
A = the future value of the investment
P = the principal amount (initial investment)
r = the annual interest rate (as a decimal)
n = the number of times that interest is compounded per year
t = the number of years
In this case, the principal amount (P) is $20,000, the annual interest rate (r) is 10% (which converts to 0.10), and the investment is compounded annually (n = 1) over a period of 6 years (t = 6).
Plugging the values into the formula:
A = 20000 * (1 + 0.10/1)^(1*6)
= 20000 * (1 + 0.10)^6
= 20000 * (1.10)^6
= 20000 * 1.77
= $35,400
Therefore, the amount that a $20,000 investment would accumulate at 10% compound interest by the end of 6 years is $35,400.