Question

-. A businessman plans to retire in 30 years. As part of his retirement plan, he has

invested $8,000 in a public utility bond that will increase his investment at a rate of
6% per year, compounded annually. Which is the best approximation of the value of
the investment after 30 years?

Answer 1

A = $45948

Explanation:

Given the following data;

Principal = $8000

Interest rate = 6% = 6/100 = 0.06

Time = 30 years

To find the future value, we would use the compound interest formula;

`A = P(1 + (r)/(100))^(t)`

Where;

A is the future value.

P is the principal or starting amount.

r is annual interest rate.

t is the number of years for the compound interest.

Substituting into the equation, we have;

`A = 8000(1 + (6)/(100))^(30)`

`A = 8000(1 + 0.06)^(30)`

`A = 8000(1.06)^(30)`

`A = 8000(5.7435)`

A = $45948