You have deposited your $10,000 into an interest-earning saving account. The annual interest rate is 8%, and it is compounded annually. So in one year, your money will equal $10,800.
Here how you calculate it:
In your case:
- FV = ?
- PV = $10,000
- r = 0.08
- N = 1
Let’s think that instead of one year, you deposit your money into an interest-earning saving account for two years with the same interest rate. Let’s look at what happened at the end of two years:
- FV = ?
- PV = $10,000
- r = 0.08
- N = 2
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