Final answer:
The value of a $25,000 investment after 8 years with a 1.2% compounded annual interest rate is $27,507.23. This calculation is based on the formula for compound interest and demonstrates the growth of the investment over time.
Step-by-step explanation:
The question you're asking pertains to the value of a $25,000 investment after 8 years with an annual compound interest rate of 1.2%. To solve this, we use the formula for compound interest, which is A = P(1 + r/n)^(nt), where:
- A represents the amount of money accumulated after n years, including interest.
- P is the principal amount (the initial amount of money).
- r is the annual interest rate (decimal).
- n is the number of times that interest is compounded per year.
- t is the time the money is invested in years.
In your case, P = $25,000, r = 0.012 (since 1.2% = 0.012 as a decimal), n = 1 (since it's compounded annually), and t = 8 years. Plugging these into the formula, we get:
A = 25000 * (1 + 0.012/1)^(1*8)
A = 25000 * (1.012)^8
A = 25000 * 1.100289
Thus, the value of the investment after 8 years is:
A = $27,507.23 (rounded to two decimal places)
So, this illustrates the power of compound interest over time, even at relatively low rates.