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An analyst notices that a CEO has consistently achieved 5% growth in profits from one year to the next. The CEO's company currently has annual profits of $646,150. If the trend continues, what will the annual profits be in 10 years?

Sagot :

Solution

[tex]\begin{gathered} A=P(1+\frac{r}{n})^{nt} \\ A=\text{?} \\ P=\text{ \$646,150} \\ r=0.05 \\ n=1 \\ t=10 \end{gathered}[/tex][tex]\begin{gathered} A=646,150(1+\frac{0.05}{1})^{1\times10} \\ \\ A=646,150(1+0.05)^{1\times10} \\ A=646,150(1+0.05)^{10} \\ A=646,150(1.05)^{10} \\ A=646,150\times1.62889 \\ A=1052510.263 \end{gathered}[/tex]

Summary:

The total amount accrued, principal plus interest, with compound interest on a principal of $646,150.00 at a rate of 5% per year compounded 1 times per year over 10 years is $1,052,510.26.

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