Freddy deposits R500 000 into a money market savings accoumt. If he se an interest rate of \( 9,5 \% \) per annum compounded amnually, calculate the of his investment after 3 years.

To calculate the future value of Freddy's investment after 3 years, we can use the formula for compound interest: \[ A = P(1 + r)^n \] where: - \( A \) is the amount of money accumulated after n years, including interest, - \( P \) is the principal amount (the initial deposit or investment), - \( r \) is the annual interest rate (decimal), - \( n \) is the number of years the money is invested or borrowed for. In Freddy's case: - \( P = R500,000 \), - \( r = 9.5\% = 0.095 \), - \( n = 3 \). Plugging in the values: \[ A = 500000(1 + 0.095)^3 \] \[ A = 500000(1.095)^3 \] \[ A = 500000(1.311) \] \[ A \approx R655,500 \] After 3 years, Freddy’s investment will grow to approximately R655,500. Now, let’s shed some light on the world of money market accounts. They're designed to offer higher interest rates than traditional savings accounts while keeping your funds relatively liquid. You may think of it as a halfway house between savings and investment accounts—safe yet lucrative! Just a heads-up: while they typically offer good returns, the interest rates can fluctuate, so it's always wise to check if you’re getting the best deal possible. Also, let's talk about the importance of compounding. The magical aspect of compound interest is that it earns interest on both the initial principal and the interest that has been added to it. It’s like planting a tree: the more roots (or interest) it grows, the bigger the tree gets (your investment). The earlier you start investing, the more you'll benefit from compounding over time, making a remarkable difference in the long run!