Question

You deposit $850 into account paying an annual simple interest rate of 7.5% find the future value of your investment in dollars after one year

Answer 1

To solve this problem, we will use the formula for compound interest:

`A_N=A_0\cdot(1+(r)/(k))^(N\cdot k).`

Where:

• A_N = is the amount of money after N years,

,

• A_0 = is the initial amount of money,

,

• r = is the interest in decimals,

,

• k = is the number of compound periods per year.

In this problem, we have:

• A_0 = $850,

,

• r = 7.5% = 0.075,

,

• k = 1 (because the interest is simple),

,

• N = 1 (after 1 year).

Replacing the data of the problem in the equation above, we get:

`A_1=850\cdot(1+(0.075)/(1))^(1\cdot1)=850\cdot1.075=913.75.`

Answer

The value of the investment after one year will be $913.75.