149k views
5 votes
An investor invests $4,500 at an interest rate of 7% compounded annually. What is the future value of the investment after 5 years? Note: Round your answer to two decimal places.

User Bones
by
7.3k points

1 Answer

4 votes

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.

User Ascanio
by
7.9k points

No related questions found

Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories