Consider the following two options. You can either invest $30,000 in a bank that offers you an interest rate of 6 percent compounded annually for 30 years, or you can lend $30,000 to your friend for 30 years at an interest rate of 10 percent compounded annually.
-Refer to the scenario above. If you invest your money in the bank, you will receive ________ on maturity.

Question

Quizplus · Accepted Answer

To find the amount on maturity for an investment in a bank with an interest rate of 6 percent compounded annually for 30 years, you use the formula for compound interest: A = P(1 + r/n)^(nt), where A is the amount on maturity, P is the principal amount ($30,000), r is the annual interest rate (6% or 0.06), n is the number of times the interest is compounded per year (1 for annually), and t is the time the money is invested for (30 years). Plugging in the values, A = 30000(1 + 0.06/1)^(1*30) = $172,304.74.

Consider the Following Two Options