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 Math Central Quandaries & Queries
 Question from Donna, a student: The future value of 450.00 six years from now at 7 percent

Hi Donna,

I am assuming your interest rate is 7% per year, compounded once a year. Thus at the end of the first year you will have your original $45.00 plus 7% of$45.00. Hence at the end of the first year you will have

$45.00 + (0.07$45.00) = $45.00 (1 + 0.07) =$45.00 (1.07)

This amount you reinvest for the second year and hence at the end of the second year you will have
$45.00 (1.07) plus 7% of$45.00 (1.07) which is

$45.00 (1.07) (1 + 0.07) =$45.00 (1.07) (1.07) = $45.00 (1.07)2 This amount you reinvest for the third year and hence at the end of the third year you will have$45.00 (1.07)3

and so on.

Penny

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