Answer to Question #171422 in Financial Math for King

Question

Compound amount

find the difference between investment (a) and (b) 150,000 is invested for five years at 8% compounded monthly (b) 150,000 is invested for five years at 8% simple interest

Answer 1

(a) The future value of 150,000 invested for five years at 8% compounded monthly is:

$FV = 150,000×(1+0.08/12)^{60} = 223,476.86.$

(b) The future value of 150,000 invested for five years at 8% simple interest is:

$FV = 150,000×(1+5×0.08) = 210,000.$