Question

A principal of S2400 is invested at 8.75% interest compounded annually How much will the investment be worth after 7 years?

Answer 1

Step-by-step explanation

The question wants us to determine the amount $2400 will yield after 7 years if compounded annually at a rate of 8.75%

To do so, we will use the formula:

`\begin{gathered} A=P(1+r)^t \\ where \\ P=\text{ \$2400} \\ r=8.75\text{ \%=}(8.75)/(100)=0.0875 \\ t=7 \end{gathered}`

Thus, if we substitute the values above we will have

`\begin{gathered} A=\text{ \$}2400(1+0.0875)^7 \\ A=\text{ }\$2400\lparen1.0875\rparen^7 \\ A=\text{ \$2400}*1.79889 \\ A=\text{ \$4317.34} \end{gathered}`

Therefore, after 7 years, the investment will be worth $4317.34