Question

Suppose your friends parents invest $20,00 in an account paying 5% compounded annually. What will the balance be after 8 years? The account balance will be $

Answer 1

$2954.91 end of year eight

Explanation:

2000 x 1.05^8 = 2000 x 1.04775 = $2954.91

Proof:

2000 x 1.05 = 2100 end of year one

2100 x 1.05 = 2205 end of year two

2205 x 1.05 = 2315.25 end of year three

2315.25 x 1.05 = 2431.01 end of year four

2431.01 x 1.05 = 2552.56 end of year five

2552.56 x 1.05 = 2680.19 end of year six

2680.19 x 1.05 = 2814.20 end of year seven

2814.20 x 1.05 = $2954.91 end of year eight