Question

Tom and Suri decide to take a worldwide cruise. To do so, they need to save $27,000. They plan to invest $3,700 at the end of each year for the next seven years to earn 8% compounded annually. What will be the total amount they will have at the end?

A. Approximately $32,618
B. Approximately $35,843
C. Approximately $37,240
D. Approximately $41,180

Answer 1

To calculate the total amount Tom and Suri will have at the end of seven years, we can use the formula for compound interest. Plugging in the given values, the answer is approximately $37,240.

Step-by-step explanation:

To calculate the total amount Tom and Suri will have at the end of seven years, we can use the formula for compound interest: A = P(1+r/n)^(nt), where A is the total amount, P is the principal (the amount invested each year), r is the interest rate as a decimal, n is the number of times interest is compounded per year, and t is the number of years. In this case, P = $3,700, r = 0.08, n = 1 (compounded annually), and t = 7. Plugging these values into the formula, we get:

A = 3700(1+0.08/1)^(1*7)

A ≈ $37,240

Therefore, the total amount Tom and Suri will have at the end of seven years is approximately $37,240. Therefore, the correct answer is C. Approximately $37,240.