Question

A principal of $4500 is invested at 8.5% interest, compounded annually. How much will the investment be worth after 5 years? (Round to the nearest dollar)

Answer 1

$6,766

Step-by-step explanation:

The amount that a principal, P accrues to when compounded after a period of t years is determined using the formula below:

`A(t)=P(1+r)^t`

In this case:

`\begin{gathered} \text{Principal, P=\$4,500} \\ Rate,\text{ r=8.5\%=0.085} \\ \text{Time, t=5 years} \end{gathered}`

Therefore:

`\begin{gathered} A(5)=4500(1+0.085)^5 \\ =4500(1.085)^5 \\ =6766 \\ \approx\$6,766\text{ (to the nearest dollar)} \end{gathered}`