Question

A customer deposits Sh. 10,000 on first January every year for four years. How much is the investment worth at the end of the four years if it attracts a compound interest of 12% p.a.?

Answer 1

The future value of the investment, with an annual deposit of Sh. 10,000 for four years at a compound interest rate of 12% per annum, is Sh. 15,744.

Let's calculate the future value of an investment with compound interest.

We can use the formula for the future value of an investment with compound interest:

`FV = P(1 + r)^n`

where:

* FV is the future value of the investment

* P is the principal amount of the investment

* r is the annual interest rate

* n is the number of years

In this case, we have:

* P = Sh. 10,000

* r = 12%

* n = 4

Therefore, the future value of the investment is:

`FV = 10000(1 + 0.12)^4 = 9834496/625`

So the answer is Sh. 15744.