Case C: Investing $1000 at 15% per year
Suppose you invest $1000 today at a 15% rate of return. Using the equation above, we can calculate the future value of this one time investment.
FV = ($1,000) (1.15)n where n = the number of years
After 10 years, this single $1,000 investment will be worth:
FV = ($1,000) (1.15)10 = $4,046
After 20 years, this single $1,000 investment will be worth:
FV = ($1,000) (1.15)20 = $16,367
After 30 years, this single $1,000 investment will be worth:
FV = ($1,000) (1.15)30 = $66,212
After 40 years, this single $1,000 investment will be worth:
FV = ($1,000) (1.15)40 = $267,864
After 50 years, this single $1,000 investment will be worth:
FV = ($1,000) (1.15)50 = $1,083,657
A single investment of $1,000 that earns a 15% rate of return for 40 years turns into over a quarter of a million dollars. If it is invested for 50 years, it becomes more than a million dollars!
At 15% money doubles every five years so a business that grows at 15% per year would double in size every five years.
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