To calculate the future value of Diane's investment over different time periods, we can use the formula for compound interest.
To calculate the amount of money Diane's initial investment will be worth in 5 years, 10 years, and 20 years, we can use the formula for compound interest: A = P(1 + r/n)^(nt), where:
- A is the future value of the investment
- P is the initial investment
- r is the interest rate (written as a decimal)
- n is the number of times the interest is compounded per year
- t is the number of years
In this case, Diane's initial investment is $500, the interest rate is 7% (or 0.07), and the investment is compounded annually (n = 1).
- For 5 years: A = 500(1 + 0.07/1)^(1*5) = $672.75
- For 10 years: A = 500(1 + 0.07/1)^(1*10) = $967.15
- For 20 years: A = 500(1 + 0.07/1)^(1*20) = $1938.63