-10-800-for-3-years-at-12-per-annum-compounded-annually.jpeg "(a) 10 800 For 3 Years At 12 Per Annum Compounded Annually")
Compounding Interest: Calculating Future Value
When it comes to investments, understanding compound interest is crucial in determining the future value of your investment. In this article, we will explore how to calculate the future value of an investment with an initial principal amount of $10,800, an annual interest rate of 12%, and a time period of 3 years, compounded annually.
The Formula
To calculate the future value, we can use the formula:
FV = PV x (1 + r)^n
Where: FV = Future Value PV = Present Value (initial investment) = $10,800 r = Annual interest rate = 12% = 0.12 n = Number of years = 3
Calculating the Future Value
Plugging in the values, we get:
FV = $10,800 x (1 + 0.12)^3 FV = $10,800 x 1.405 FV = $15,156.00
Conclusion
After 3 years, with an annual interest rate of 12% compounded annually, the investment of $10,800 will grow to a future value of $15,156.00. This demonstrates the power of compound interest in growing your investments over time.
