Question

2) Amanda invests $6,540 in a retirement

account with a fixed annual interest rate of
5% compounded 6 times per year. What will
the account balance be after 20 years?
A) $16,031.88 B) $17,704.05
C) $15,329.01 D) $16,844.10

Answer 1

B) $17,704.05

Explanation:

20 years later is a time in the future so you use Future value formula;

FV = PV* (1+r)^t

where PV= Amount invested in the present = $6,540

r= discount rate = (5% / 6) = 0.833% or 0.00833

t= total duration = 20 *6 = 120

Next, plug in the numbers into the formula;

=6,540* (1+0.00833)^120

=6,540 * 2.707041491

= 17,704.05