Question

You are saving for a new car. You place $11,100 into an investment account today. How much will you have after four years if the account earns (a) 3%, (b) 5%, or (c) 7% compounded annually?

Answer 1

Answer: hope this helps

(a) 3%: $12,509.05

(b) 5%: $13,493.57

(c) 7%: $14,562.76

Explanation:

To calculate the future value of an investment compounded annually, you can use the formula:

FV = P(1 + r)^n

Where:

- (FV) is the future value of the investment

- (P) is the initial principal (the amount you placed in the account)

- (r) is the annual interest rate (expressed as a decimal)

- (n) is the number of years

Let's calculate the future values for each scenario:

(a) 3% interest rate:

FV = 11100(1 + 0.03)^4 \approx 11100(1.1255) approx 12509.05

After four years, with a 3% interest rate, you would have approximately $12,509.05.

(b) 5% interest rate:

FV = 11100(1 + 0.05)^4 approx 11100(1.21550625) approx 13493.57

After four years, with a 5% interest rate, you would have approximately $13,493.57.

(c) 7% interest rate:

\[FV = 11100(1 + 0.07)^4 approx 11100(1.3107961) approx 14562.76

After four years, with a 7% interest rate, you would have approximately $14,562.76.