Question

Aaron just inherited $8000 from his grandmother. He plans to invest the money, not
touching it for 20 years. He plans to invest in treasury bills at 6.67% interest,
compounded annually. How much money will he have after 20 years?

Answer 1

The money he would have after 20 years is $29,102.87

What is compounding?

Compounding occurs when both the principal and the interest already accrued earns interest.

What is the future value of the money?

The formula for calculating future value:

FV = P (1 + r)^nm

• FV = Future value
• P = Present value
• R = interest rate
• m = number of compounding
• N = number of years

$8000 x (1.0667)^20 = $29,102.87

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