What is the future value of $6,000 invested today at 7% interest in 20 years with monthly compounding?

Disable ads (and more) with a membership for a one time $4.99 payment

Prepare for the UCF GEB3006 Career Development and Financial Planning Final Exam. Boost your readiness with key insights, questions, and strategies. Dive into the exam format and expectations to ace your test!

To determine the future value of an investment with compound interest, we use the formula:

[ FV = P \times (1 + \frac{r}{n})^{nt} ]

Where:

  • ( FV ) is the future value of the investment,
  • ( P ) is the principal amount (the initial investment),
  • ( r ) is the annual interest rate (as a decimal),
  • ( n ) is the number of times interest is compounded per year,
  • ( t ) is the number of years the money is invested for.

In this scenario:

  • The principal amount ( P ) is $6,000,
  • The annual interest rate ( r ) is 7%, or 0.07 in decimal,
  • The monthly compounding means ( n ) is 12,
  • The investment period ( t ) is 20 years.

Plugging in the values:

[ FV = 6000 \times (1 + \frac{0.07}{12})^{12 \times 20} ]

Calculating the monthly interest rate:

[ \frac{0.07}{12} = 0.0058333 ]

Now substituting this value into the formula:

More Multiple Choice Questions