Question

Suppose you have just inherited a sum of money. Let’s say you choose to invest the money. How much did you inherit? Choose an amount between $1000 and $100,000. Do not choose an increment of 1000. In other words, do not choose $1000, $2000, $5000, $14000, etc.

What is your interest rate? Choose a rate between 0.5% and 3%.
Using yearly compounding, calculate the accrued value after 5 years, 10 years, and 15 years. Show all work.

Answer 1

Amount =$48003.20

Explanation:

Here apply the compound interest formula;

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

where;

P = Principal amount invested = $37500

r = rate of interest as a decimal, 2.5% =0.025

n = number of compounding per year=1

t = time period the amount in invested=10

In our case, the amount after investing will be:-

`A=37,500(1+0.025)^(10)`

`A=37,500(1.025)^(10)`

`A=48003.20`

Interest earned after the period:

= $48003.20 - $37500 = $10503.20

I hope this helps....