Final answer:
The future value of a $4,500 investment at a 7% annual interest rate compounded annually over 5 years is $6,311.48.
Step-by-step explanation:
To calculate the future value of an investment with compound interest, you can use the formula A = P(1 + r/n)^(nt), where:
- P is the principal amount (the initial amount of money)
- r is the annual interest rate (in decimal form)
- n is the number of times that interest is compounded per year
- t is the number of years the money is invested for
For your investment of $4,500 at an interest rate of 7% compounded annually over 5 years, the future value can be calculated as follows:
P = $4,500
r = 0.07 (since 7% = 0.07)
n = 1 (since the interest is compounded annually)
t = 5
Plugging these values into the formula gives us:
A = 4500(1 + 0.07/1)^(1*5)
A = 4500(1 + 0.07)^5
A = 4500(1.07)^5
Calculating this, we get:
A = 4500 * (1.40255)
A = $6,311.48
Therefore, the future value of the investment after 5 years will be $6,311.48, when rounded to two decimal places.