Final answer:
To find out the future value of the trust fund with a principal of $10,000, an annual interest rate of 7%, compounded annually for 16 years, we use the compound interest formula $10,000(1.07)^16. The amount will be the result of this calculation.
Step-by-step explanation:
A young man is the beneficiary of a trust fund established for him 16 years ago at his birth. If the original amount placed in trust was $10,000, we need to calculate how much he will receive if the money has earned interest at the rate of 7% per year compounded annually. To calculate the future value of the trust fund, we can use the formula for compound interest, which is A = P(1 + r/n)^(NT), where:
- A is the amount of money accumulated after n years, including interest.
- P is the principal amount (the initial amount of money).
- r is the annual interest rate (decimal).
- n is the number of times that interest is compounded per year.
- t is the time the money is invested for in years.
In this case, the formula becomes: $10,000(1 + 0.07/1)^(1*16), which simplifies to $10,000(1.07)^16. By calculating this, we can determine the total amount the young man will receive from the compound interest.