Question

If you invest in a $20,000 trust fund with an expected investment return of 8% annually and the sales charge is 5%, how much money will you have in your fund after 30 years?

a) $35,846
b) $35,000
c) $27,000
d) $22,800

Answer 1

To calculate the final amount of money in the fund after 30 years, use the formula for compound interest. Plugging in the given values, the answer is approximately $93,225.89.

Step-by-step explanation:

To calculate the final amount of money in your fund after 30 years, you will need to use the formula for compound interest. The formula is: A = P(1 + r/n)^(nt), where A is the final amount, P is the principal amount (initial investment), r is the annual interest rate (expressed as a decimal), n is the number of times the interest is compounded per year, and t is the number of years.

In this case, the principal amount is $20,000, the annual interest rate is 8% (or 0.08), the sales charge is 5% (or 0.05), and the number of times interest is compounded per year is not mentioned, so we can assume it is compounded annually.

Plugging these values into the formula, we get:

A = 20000(1 + 0.08/1)^(1*30)

A = 20000(1.08)^30

A = 20000(4.661294551)

A ≈ 93225.89

Therefore, you will have approximately $93,225.89 in your fund after 30 years.