We will state that we will invest $1,000 for five years, and the rate is 8%.

First, write down the variables.

The present value is $1,000.

The rate is 0.08.

The period is five years.

Secondly, solve for the future value.

FV = PV x ( 1 + r ) ^ n

= $1,000 x ( 1 + 0.08) ^ 5

= $1,000 x (1.08) ^ 5

How do we calculate 1.08 ^ 5?We multiply 1.08 five times.

1.08 ^ 5 = 1.08 x 1.08 x 1.08 x 1.08 x 1.08

1.08 ^ 5 = 1.4693280768

FV = PV x ( 1 + r ) ^ n

= $1,000 x ( 1 + 0.08) ^ 5

= $1,000 x (1.08) ^ 5

= $1,000 x 1.4693280768

= $1,469.33

Would you prefer to invest $1,000 for three years or five years?Why? Please explain.