Question

(Future value) Leslie Mosallam, who recently sold her Porsche, placed $10,000 in a savings account paying annual compound interest of 6%.

a. Calculate the amount of money that will accumulate if Leslie leaves the money in the bank for 1, 5, and 15 years.

Answer 1

To determine the future value of Leslie's savings, the compound interest formula is used, yielding amounts of $10,600 after 1 year, $13,382 after 5 years, and $24,002 after 15 years.

Step-by-step explanation:

The formula for calculating the future value of an investment given compound interest is FV = PV(1 + r)n, where FV is the future value, PV is the present value, r is the annual interest rate (expressed as a decimal), and n is the number of compounding periods (years, in this case).

Let's calculate the amount of money Leslie Mosallam will accumulate in her savings account after 1, 5, and 15 years.

• For 1 year: FV = $10,000(1 + 0.06)1 = $10,600
• For 5 years: FV = $10,000(1 + 0.06)5 = $13,382
• For 15 years: FV = $10,000(1 + 0.06)15 = $24,002

These calculations illustrate the impact of compound interest over different periods.