Question

You invested $1,400 in an account that pays 7 percent simple interest. How much more could you have earned over a 20-year period if the interest had compounded annually

Answer 1

$4,017,56

Step-by-step explanation:

The Future Value is the amount that you would have earned over the 20year period. This will be greater than the amount of the initial investment due to the interest compounded.

The Future Value (FV) is calculated as follows :

PV = - $1,400

I = 7 %

N = 20

P/yr = 1

PMT = $0

FV = ?

Using a financial calculator to in put the values as shown, the Future Value will be $5,417.56.

The Total Interest on this Investment was $4,017,56 ($5,417.56 - $1,400).