After 4 years, a $5,000 investment earning a 6 percent annual interest rate will be worth more than
a $6,000 investment earning 1 percent annual interest.

Question

Quizplus · Accepted Answer

To calculate the future value of the $5,000 investment earning a 6 percent annual interest rate after 4 years, we can use the formula:

FV = PV × (1 + r)n

where FV is the future value, PV is the present value, r is the annual interest rate, and n is the number of years.

FV = $5,000 × (1 + 0.06)^4 = $6,661.05

To calculate the future value of the $6,000 investment earning a 1 percent annual interest rate after 4 years, we can use the same formula:

FV = $6,000 × (1 + 0.01)^4 = $6,241.72

Therefore, after 4 years, the $5,000 investment earning a 6 percent annual interest rate will be worth more than the $6,000 investment earning 1 percent annual interest.

After 4 Years, a $5,000 Investment Earning a 6 Percent