268 Find the annual worth in years 1 through 10 of an invest

268 Find the annual worth in years 1 through 10 of an investment that starts at $8000 in year 1 and increase by 10% each year. The interest rate is 10% per year.

Solution

Initial Value = $8,000

Interest rate = 10%

Time period = 10 years

At end of year 1, the principle will earn interest of 10% i.e. $800. Thus at the beginning of the second year, the principal amount would be $8000+$800 = $8800

At end of year 2, the principle will earn interest of 10% i.e. $880. Thus at the beginning of the third year, the principal amount would be $8800+$880 = $9680

And so on,

Total amount at the end of 10 years = 8,000(1.1)^¹⁰

= 8,000*2.59

= $20,720