You have $25,000 in an investment account today. How much will be in the account

Question

You have $25,000 in an investment account today. How much will be in the account in 30 years if the account earns (a) 8% per year, (b) 8% compounded semiannually, (c) 8% compounded quarterly, (d) 8% compounded monthly, and (e) 8% compounded daily? Comment on the effect of more frequent compounding.
You have $25,000 in an investment account today. How much will be in the account in 30 years if the account earns (a) 8% per year, (b) 8% compounded semiannually, (c) 8% compounded quarterly, (d) 8% compounded monthly, and (e) 8% compounded daily? Comment on the effect of more frequent compounding. You have $25,000 in an investment account today. How much will be in the account in 30 years if the account earns (a) 8% per year, (b) 8% compounded semiannually, (c) 8% compounded quarterly, (d) 8% compounded monthly, and (e) 8% compounded daily? Comment on the effect of more frequent compounding.

Explanation / Answer

a) 8% ..

amount = 25000 * ( 1.08)^ 30 = $ 251,566.42223

b)

amount = 25000 * ( 1.04 )^60 =$ 262,990.68520

c)

amount = 25000 * ( 1.02 )^120 = $ 269,129.076

d)

amount = 25000 * ( 1 + ( 0.08 / 12 ) ) ^ ( 30*12 ) = $ 273,393.241444

e)

amount = 25000 * ( 1 + (0.08/365) ) ^ ( 30*365 ) = $ 275,506.94847354

more is the frequency of compounding .. more will be the total amount for a given period of time

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