problem: compound interest problem 1
example: Susan invests € 40 000,- at an interest rate of 4% for seven years.
question: How much is her capital including compound interest after seven years?
answer: compound interest problem 1
1. step: given/wanted
present value (pv) = € 40 000,-
annual interest rate (r) = 4%
number of periods (n) = 7 years
future value (fv) = capital including compound interest after 7 years?
2. step: calculate
future value = fv
present value = pv
r = annual rate
n = number of periods
fv = pv • (1 + r)n
fv = 40 000 • (1 + 0,04)7
fv = € 52 637,27
3. step: answer
After seven years she will receive € 52 637,27.