Question

A back account pays an interest rate of 6% every 1 year. You deposit $5000 into the account. How much money will you have in 5 years?

A. $7092
B. $3449
C. $3670
D. $6691

Answer 1

C: $6691

Explanation:

This problem is one in compound interest. The general formula is shown below. The principal, P, is $5000, the annual interest rate, r, is 0.06 (expressed as a decimal fraction), and the number of years, t, is 5 years: A represents the Amount after 5 years:

A = P(1 + r)^t becomes A = ($5000)(1 + 0.06)^5, or

A = (5000)(1.06)^5 = $6691.12 (Answer D)