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You just received a $10,000 gift from your grandmother, and you wish to save it for a rainy day. If interest is 8% compounded daily, what is the value of this gift in 5 years?

a. $14,693.28
b. $14,917.59
c. $14,215.02
d. $10,010.96
e. None of the above.

User Robby Pond
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1 Answer

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Final answer:

The value of a $10,000 gift compounded daily at an 8% interest rate over 5 years is approximately $14,693.28.

Step-by-step explanation:

The question asks about the future value of a $10,000 gift saved at an 8% interest rate compounded daily over a period of 5 years. To calculate the future value, you can use the compound interest formula 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 ($10,000 in this case), r is the annual interest rate (0.08 for 8%), n is the number of times that interest is compounded per year (in this case, daily compounding means n=365), and t is the time the money is invested for in years (5 years in this scenario).

Plugging in the values into the formula gives us: A = $10,000(1 + 0.08/365)^(365*5). When calculated, this gives us a future value of approximately $14,693.28, making option a the correct choice.

User Mark Nielsen
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