Question

Calculate the future value in three years of $5,000 invested today at an annual interest rate of 6% (assuming annual compounding).

a. $5,954.10
b. $6,725.00
c. $5,352.00
d. $5,000.00

Answer 1

To calculate the future value of an investment with compound interest, use the formula: Future Value = Principal * (1 + Interest Rate)^Time. Plugging in the given values, the future value is $5,954.10.

Step-by-step explanation:

To calculate the future value of an investment with compound interest, we can use the formula:

Future Value = Principal * (1 + Interest Rate)^Time

For this question, the Principal is $5,000, the Interest Rate is 6% (expressed as decimal 0.06), and the Time is 3 years. Plugging these values into the formula, we have:

Future Value = $5,000 * (1 + 0.06)^3 = $5,954.10

Therefore, the correct answer is a. $5,954.10.