If I can invest $2000 for 45 years at an interest rate of 11% that is compounded monthly, how can I find the final amount without having a long chart? I looked at calculators on the internet and they don't tell me how they get the answer.
2007-03-20 14:48:34 · 4 answers · asked by belizean_angel_24 1 in Business & Finance ➔ Investing
no, you only start with $2,000 and not add anything. how do you come up with that answer? is there a formula and how do you find the formula?
2007-03-20 14:58:27 · update #1
I don't pay in anything, I just start with $2,000 and leave it. I don't add any money.
2007-03-20 15:12:40 · update #2
The formula is principal * (1+rate/12)^(# years*12)
You divide the rate by 12 and multiply the number of years to maturity by 12 to account for the monthly compunding
2000*[1+(11%/12)]^(45*12)
=2000*(1.009167^540)
=2000*138.0271
=276,054.20
2007-03-20 15:03:06 · answer #1 · answered by BosCFA 5 · 0⤊ 0⤋
I shall give you the coninuous compounding formula which is Final amount = I e^r x t, where I is the initial principal invested, here $2000, r is the rate of interest here 11% and t is the time period here 45 years.
So your final amount is = 2000 e^0.11 x 45=$282,350
2007-03-20 19:01:41 · answer #2 · answered by Mathew C 5 · 0⤊ 0⤋
EDIT:
OK, so you're investing $2K and not touching it for 45 years. Got ya. The CFA guy is right.
The formula would be 2,000* [1+(.11/12)] ^ (12*45)
which would result in $276,054.24.
In Excel, type in any cell: =FV(0.11/12,45*12,0,-2000,0).
2007-03-20 15:02:45 · answer #3 · answered by FinanceMike 2 · 0⤊ 1⤋
go to www.moneychimp.com to find out that the answer is
$276,054.24
I used the compound interest calculator
2007-03-20 17:06:28 · answer #4 · answered by hollandse_2000 1 · 0⤊ 0⤋