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Answer :
If you invest $10,000 today at 10% interest, how much you will have in 10 years depends on the type of compounding used. Compounding is the process of reinvesting the interest earned on an investment to generate more earnings over time.
There are two types of compounding: simple and compound.Simple interest is calculated based only on the principal amount invested, while compound interest is calculated based on the principal amount plus any interest earned. The formula for calculating the future value of an investment using compound interest is:
FV = PV x (1 + r/n)^(n x t)
Where:
FV = future value
PV = present value
r = interest rate
n = number of compounding periods per year
t = number of years
Assuming that the investment compounds annually (n=1), the calculation for the future value of the investment is:
FV = $10,000 x (1 + 0.10/1)^(1 x 10)
FV = $10,000 x (1.10)^10
FV = $10,000 x 2.5937
FV = $25,937.50
Therefore, the correct answer to this question is option B: $25,940. In 10 years, the investment of $10,000 at 10% interest compounded annually will be worth $25,940. It's important to note that this calculation assumes that no withdrawals or additional contributions are made to the investment during the 10-year period.
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