Question

Use the formula for compound amount:$12,000 at 8% compounded annually for 4 years

Answer 1

Given the question, the following are the solution steps to answer the question.

STEP 1: Write the formula for calculating the compunded amount

`A=P(1+(r)/(n))^(nt)`

where

A = final compunded amount

P=initial principal balance

r=interest rate

n=number of times interest applied per time period

t=number of time periods elapsed

STEP 2: Write the given values

n will be 1 since it is compounded anually

`P=12000,r=(8)/(100)=0.08,n=1,t=4`

STEP 3: Calculate the compounded amount

`\begin{gathered} A=12000*(1+(0.08)/(1))^(1*4) \\ A=12000*(1+0.08)^4 \\ A=12000(1.08)^4 \\ A=12000*1.36048896 \\ A=16,325.86752 \\ A=\text{\$}16,325.87\text{ to the nearest cents} \end{gathered}`

Hence, the compounded amount after 4 years is approximately $16,325.87 to the nearest cents.