Question

Sheba opened a retirement account with $36,500. Her account grew

at a rate of 7% per year compounded annually. She made no deposits
or withdrawals on the account. At the end of 20 years, what was the
account worth, to the nearest dollar?
(1) $87,600 (3) $141,243
(2) $130,786 (4) $1,483,444,463

Answer 1

After 20 years, the account is worth 3) $141,243 rounded to the nearest dollar.

7% interest rate compounded annually means that the interest earned also earns an interest with the rate of 7%. Thus, the principal is multiplied with 1.07 or 107%.

Y1 36,500.00 1.07 39,055.00
Y2 39,055.00 1.07 41,788.85
Y3 41,788.85 1.07 44,714.07
Y4 44,714.07 1.07 47,844.05
Y5 47,844.05 1.07 51,193.14
Y6 51,193.14 1.07 54,776.66
Y7 54,776.66 1.07 58,611.02
Y8 58,611.02 1.07 62,713.80
Y9 62,713.80 1.07 67,103.76
Y10 67,103.76 1.07 71,801.02
Y11 71,801.02 1.07 76,827.10
Y12 76,827.10 1.07 82,204.99
Y13 82,204.99 1.07 87,959.34
Y14 87,959.34 1.07 94,116.50
Y15 94,116.50 1.07 100,704.65
Y16 100,704.65 1.07 107,753.98
Y17 107,753.98 1.07 115,296.76
Y18 115,296.76 1.07 123,367.53
Y19 123,367.53 1.07 132,003.26
Y20 132,003.26 1.07 141,243.48