Rate of Return

CHAPTER 3, LESSON 6

NAMES DATE
Michael Rivera-Matos 1/12/24

DIRECTIONS
Work with a partner or small group to calculate the future value of a one-time investment of $500 using these
interest rates: 10%, 11%, and 12%. Then, design a graph that compares the impact that each interest rate has
on the investment. Use 40 years as the amount of time for your investment.

Use the Compound Interest Formula and compute manually: FV = PV(1+r/m)mt

• FV is the future value of the investment
• PV is the present value of the investment (the principal you start with, your first deposit)
• r is the annual rate of interest as a decimal (10% is expressed as the decimal 0.1)
• m is the number of times per year the interest is compounded (monthly=12, annually=1
etc.). Interest will be compounded once a year (1).
• t is the number of years you leave it invested (in this case, 40)

Show your work.

INVESTMENT 1 INVESTMENT 2 INVESTMENT 3

PV = 500 m= 1 PV = 500 m= 1 PV = 500 m= 1

r = 10% t = 40 r = 11% t = 40 r = 12% t = 40
FV=500(1(0.1/1)^40 FV=500(1(0.11/1)^40 FV=500(1(0.12/1)^40

FV = 243,925.91 FV = 323,413.47 FV = 430,071.20

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