Question

How much money will you have after 10 years if you invest $2,500 into an account that pays 12% per year, compounded annually? (Remember, the formula is A = P(1 + r)t.)

A. $7,764.62
B. $8,784.14
C. $7,674.68
D. $7,846.07

Answer 1

Option A

Explanation:

We must use the compound interest formula:

`A = P(1 + r)^t`

Where

P is the initial amount = 2500

r is the annual interest rate =0.12

t is time in years = 10

A is the final amount

Then we substitute these values in the formula:

`A = P(1 + r)^t\\\\A = 2500(1+0.12)^10\\\\A = 7,764.62`

Answer 2

A. $7,764.62

Explanation:

The amount you will have after 10 years if you invest $2,500 into an account that pays 12% per year, compounded annually is given by

`A=P(1+r\%)^t`

where
`t=10` years

`r\%=0.12`

and P=$2,500

We substitute these values into the formula to obtain;

`A=2500(1+0.12)^(10)`

This will give us;

`A=2500(1.12)^(10)`

`A=7764.6205`

We round to the nearest hundredth to obtain;

`A=7,764.62`

The correct choice is A.