Question

If $14,000 is invested in an account for 15 years. Find the value of the investment at the end of 15 years if the interest is: (a) 5% simple interest: $ ____(b) 5% compounded annually: $ _____Round your answers to the nearest cent.

Answer 1

(a)

For the simple interest we can use the following formula:

`A=P+P*r*t`

Where:

A = Amount after t years

P = Principal = $14000

t = 15

r = 5% = 0.05

so:

`\begin{gathered} A=14000+14000*0.05*15 \\ A=14000+10500 \\ A=24500 \end{gathered}`

Answer:

$24500

(b)

For the compound interest we can use the following formula:

`A=P\lparen1+r)^t`

Therefore:

`\begin{gathered} A=14000\left(1+0.05\right)^(15) \\ so: \\ A=29104.99 \end{gathered}`

Answer:

$29104.99