Mr Mphanya makes an initial investment of R5000 for a period of 3 years. Find the value of the investment after 3 years, if the investment earns the return of 10% compounded annually
To find the value of the investment after 3 years with a return of 10% compounded annually, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the investment
P = the principal amount (initial investment) = R5000
r = the annual interest rate as a decimal = 0.10
n = the number of times the interest is compounded per year = 1 (compounded annually)
t = the number of years the money is invested for = 3
Plugging in the values:
A = R5000(1 + 0.10/1)^(1*3)
A = R5000(1 + 0.10)^3
A = R5000(1.10)^3
A = R5000(1.331)
A = R6655.00
Therefore, the value of the investment after 3 years with a return of 10% compounded annually is R6655.00.