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How do calculates returns on an investment?


If i started with a monthly amt of 100, that increased by 10% every year for the last five years.

Assuming interest is compound (you earn interest on your interest)...

One way to do it is to simply take the amount you start with, multiply by 1 + the interest rate (in this case .1) and repeat that step for every year.

Year 0 = 100
Year 1 = 110
Year 2 = 121
Year 3 = 133.1
Year 4 = 146.41
Year 5 = 161.051

The faster way to do it is the use the formula:
FV = PV * (1+ i)^n

Where FV is the future value (the amount you end up with), PV is the present value (the amount you started with), i is the interest rate and n is the number of periods.

FV = 100 * (1+.1)^5
FV = 161.051

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