Question

Meridian credit union expects an average annual growth rate of​ 3% for the next four years. if the assets of the credit union currently amount to​ $11.4 billion, what will the forecasted assets be in four​ years?

A. $1.43 billion 7
B. $12.83 billion
C. $1.45 billion
D. $32.56 billion
E. $12.85 billion

Answer 1

Using the compound interest formula with an annual growth rate of 3%, Meridian Credit Union's forecasted assets in four years are calculated to be $12.85 billion.

Step-by-step explanation:

If the Meridian Credit Union expects an average annual growth rate of 3% for the next four years, and the current assets are $11.4 billion, we can calculate the forecasted assets after four years using the formula for compound interest A = P(1 + r/n)^(nt), where:

• P is the principal amount (the initial amount of money)
• r is the annual interest rate (the growth rate)
• 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, since the growth rate is compounded annually (once per year), n is equal to 1. Therefore, the formula simplifies to A = P(1 + r)^t.

Substituting the given values:

A = 11.4 billion * (1 + 0.03)^4

A = 11.4 billion * (1.03)^4

A = 11.4 billion * 1.1255

A = $12.85 billion

Thus, the forecasted assets of Meridian Credit Union in four years will be $12.85 billion.