If i investe £1000 at a 5% growth rate per year what would it be worth in 27 years? And how do i calculate it?
Answers:
If you are only investing a single lump sum of £1000 then due to the compounding of interest your £1000 will be worth 1000 x (1.05^27) = £3733.46 after 27 years.
If you are adding a lump sum of £1000 at the beginning of each tax year for the same 27 years then your £27000 will be worth £57402.58
Bear in the mind the effect of inflation in reducing the buying power of these sums.
£3733.46
5% of 1000 = 50 (5 x 1000 ÷ 100)
So it would be 1050 in the first year.
You look it up in a future values table.
£3733.46
This assumes that interest is added once a year.
Calculator is below - it is in dollars, but it still works.
1000 x 1.05 = balance plus interest at the end of the first year = 1050
(1050 + 1000) x 1.05 = balance plus interest at the end of second year = 2152.50
(2152.50 + 1000) x 1.05 = balance plus interest at the end of third year = 3310.125
.and so on..
3733.46
You can either calculate it using Excel or the way I did 1.05^27 x 1,000.00
This gives the end amount based on the money being compounded at 5% annually
depends on how often the interest is compounded (eg, Monthly, Quarterly, Annually, etc.)
Look into reverse-amortization.
divide 1000 by 5 gives you £50 per year then multiply by 27 gives you £1350 then add on your £1000 original investment
Use this formula: (1000 x 1.05) ^27
There are couple of conditions which are not specified in the question.The growth of money can be on simple interest or compound interest. The compounding of interest can be done yearly,sixmonthly or quarterly etc.It depends on the terms agreed. Any way we assume that it is compounded annually and work out the answer.
Compounded Sum=p(1+r/100)^n
(p=principal,r=rate of interest,n=no. of years.)
=1000(1.05)^27=1000*3.7334
=3733.4 Pounds
Something you need to bare in mind is, is the 5% interest net, gross or AER. Banks will advertise the AER rate, but the gross is slightly lower, and then the gross is taxed so you will get a lower net rate. The best thing to do is ring the bank, they will tell you what the net rate is and advise you how much your investment will be worth in years to come. Also rememebr that interest rates change over time!
A = P(1+r)n (where means 'to the power of')
(A is the final amount)
(P is the principle. i.e. the amount invested)
and r is the rate of interest per year.as a decimal)
So the answer to your problem is
A = £1000( 1.05)27
= £1000 (3.733456322341etc)
= £3733.46
Find log (1.05), multiply by years, find inverse log, multiply by £1000.
ok this is how we solve this one
assuming its a 5% growth rate per year
first we calculate the interest we earn on the principle for the period of 27 yrs.
for that we calculate the
Simple Interest= (principle*number of years *growth rate)/100
principle=£1000
number of years=27yrs
growth rate=5%
(1000*27*5)/100=£1350
so the interest you earn on ur principle of £1000 over a period of 27 yrs =£1350
hence the actual amount u get at the end of 27 yrs at the growth rate of 5% per year is as follows
Total amount=principle+the interest you earn on ur principle of £1000 over a period of 27 yrs
=£1000+£1350
..
so u get £2350
If the 5% interest is added annually then it would be 1000(1.05^27)
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