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Chapter 14

2.2 Compound interest

A sum invested today will earn interest. Compounding calculates the future value of a
given sum invested today for a number of years.

Present value Future value

Formula for compounding:

n
V = X(1+r) V = Future value
X = Initial investment (present value)

r = Interest rate

n = number of time periods

How much would $2,000 invested at 6% be worth at the end of 4 years?

V =

Illustrations and further practice

Now try TYU questions 2 and 3 from Chapter 14

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