Wednesday, June 4, 2008

Investing at 5% per year


Case A: Investing $1000 at 5% per year

Suppose you invest $1000 today at a 5% rate of return. Using the equation above, we can calculate the future value of this one time investment.

FV = ($1,000) (1.05)n where n = the number of years

After 10 years, this single $1,000 investment will be worth:

FV = ($1,000) (1.05)10 = $1,629


After 20 years, this single $1,000 investment will be worth:

FV = ($1,000) (1.05)20 = $2,653


After 30 years, this single $1,000 investment will be worth:

FV = ($1,000) (1.05)30 = $4,322


After 40 years, this single $1,000 investment will be worth:

FV = ($1,000) (1.05)40 = $7,040


After 50 years, this single $1,000 investment will be worth:

FV = ($1,000) (1.05)50 = $11,467

1 comment:

  1. Come on now you can do better than just five percent a year.

    ReplyDelete