Question

Suppose your​ friend's parents invest $25,000 in an account paying 6% compounded annually. What will the balance be after 9 ​years?

Answer 1

The formula is Future value = Investment * (1 + interest/100)^ (number of periods)

Then the value after 9 years will be: 25,000 * (1 + 6/100)^9 = 25,000 * (1.06)^9 = 42,237 (I rounded to the nearest integer).

You can deduce that formula if you watch the sequence

After 1 year: 25,000 + 6% * 25,000 = 25,000 (1.06)

After 2 years 25,000 (1.06) * (1.06) = 25,000*(1.06)^2

After 3 years 25,000 * (1.06)^3

After n years 25,000 * (1.06)^n

n = 9 => 25,000 * (1.06)^9


Answer: 42,237 (rounded)