Given an annual interest rate of 700 percent how much is 1 7

Given an annual interest rate of 7.00 percent, how much is $1, 700 today equivalent to in 10 years? In 6 months? In 18 months? Given an annual interest rate of 5.00 percent, how much is $5, 500 in 10 years equivalent to today? What if the interest rate is only 0.5 percent? Given an annual interest rate of 3.00 percent, how much is $45,000 in 6 months equivalent to today? What if the interest rate is only 0.500 percent? If you place $600 from your first paycheck into a Roth IRA earning 4.00 percent annual interest, how much will it be worth when you withdraw it in 40 years?

Solution

1. rate , r = 7% ; Principal = $1700

Applying compound interest formula : A = P( 1+r)^t where t = time , A = amount

t = 10 yrs ; A = 1700(1 +0.07)^10 = $ 3344.157

t = 6 months = 0.5 yrs ; A = 1700(1 +0.07)^0.5 = $ 1758.49

t = 18 mnths = 1.5 yr ; A = 1700( 1+0.07)^1.5 = $ 1881.59

2. r = 5% A = $5500 ; 5500 = P(1.05)^10

P = $ 5500/1.6288 = $ 3376.72

Today it is equivalent = $ 3376.72

If r = 0.5%

5500 = P(1.005)^10

P = 5500/1.0511 = $5232.61