Consider a $5,000 deposit earning 10 percent interest per year for 10 years. What is the future value, how much total interest is earned on the original deposit, and how much is interest earned on interest?
Answer to relevant QuestionsWhat would be more valuable, receiving $500 today or receiving $625 in three years if interest rates are 7 percent? Why?What is the value in year 15 of a $250 cash flow made in year 3 if interest rates are 11 percent?You invested $2,000 in the stock market one year ago. Today, the investment is valued at $1,500. What return did you earn? What return would you need to get next year to break even overall? Determine the interest rate earned on a $1,400 deposit when $1,800 is paid back in one year. The interest on your home mortgage is tax deductible. Why are the early years of the mortgage more helpful in reducing taxes than in the later years?
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