Compound Interest and Investment Growth

This video tutorial covers the use of compound interest formulas to solve word problems. It explains two main formulas: one for regular compounding and another for continuous compounding. The video provides examples, including calculating future values, determining initial deposits, and finding required interest rates. It emphasizes the importance of early saving and the impact of compounding frequency on investment growth.

What does the variable 'P' represent in the compound interest formula?

• Annual interest rate

• Principal amount or initial investment

• Number of times interest is compounded per year

• Future value of the investment

If an investment is compounded monthly, what is the value of 'n'?

• 1

• 4

• 12

• 365

When should you use the continuous compounding formula?

• When interest is compounded annually

• When interest is compounded continuously

• When interest is compounded quarterly

• When interest is compounded monthly

What is the future value of an investment of $20,000 at 8% annual interest compounded monthly after 40 years?

• $485,467.79

• $400,000.00

• $500,000.00

• $600,000.00

How much should John invest now to have $2 million in 45 years at 9.5% interest compounded quarterly?

• $29,250

• $50,000

• $100,000

• $200,000

What annual interest rate is needed for Sarah to turn $10,000 into $100,000 in 20 years with annual compounding?

• 8.4%

• 10.5%

• 15.0%

• 12.2%

How many years will it take for Mary’s $50,000 investment to reach $1 million at 8.4% interest compounded semiannually?

• 20 years

• 36.4 years

• 40 years

• 30 years

What is the future value of Juliet's $100,000 investment at 7.2% interest compounded continuously after 30 years?

• $500,000

• $867,013.77

• $1,000,000

• $1,500,000

How much should Mark invest now to have $1.5 million in 50 years at 12% interest compounded continuously?

• $100,000

• $50,000

• $10,000

• $3,718.13

How long will it take for John's $5,000 investment to grow to $2 million at 11% interest compounded continuously?

• 30 years

• 54.47 years

• 40 years

• 50 years