Question

Donald Spear invests $17,000 today in a fund that earns 8% compounded annually. To what amount will the investment grow in 3 years?

Option 1: $20,332
Option 2: $22,057
Option 3: $24,087
Option 4: $26,362

Answer 1

The investment will grow to approximately $20,332 in 3 years. So, the correct answer is Option 1: $20,332.

Step-by-step explanation:

To find the amount the investment will grow to in 3 years, we can use the formula for compound interest:

A = P(1+r/n)^(n*t)

Where:

A is the future value of the investment,

P is the principal amount (the initial investment),

r is the annual interest rate,

n is the number of times interest is compounded per year,

and t is the number of years.

Using the given values:

P = $17,000

r = 8%

n = 1

t = 3

Substituting the values into the formula:

A = 17000(1 + 0.08/1)^(1*3)

A = 17000(1.08)^3

A ≈ $20,332

Therefore, the investment will grow to approximately $20,332 in 3 years.

So, the correct answer is Option 1: $20,332.