Question

You invest $1200 and it grows at a rate of 7% for 5 years. Which expression gives the value of your investment?

Answer 1

The expression gives the value of your investment is
`A=1200(1.07)^(5)`

The value of investment after 5 years is $ 1683.06

Solution:

Given that You invest $1200 and it grows at a rate of 7% for 5 years

To find: Expression that gives the value of your investment

From given information,

Principal = $ 1200

rate of interest = 7 %

number of years = 5 years

The formula for compound interest, including principal sum, is:

`A=p\left(1+(r)/(n)\right)^(n t)`

Where,

A = the future value of the investment/loan, including interest

P = the principal investment amount (the initial deposit or loan amount)

r = the annual interest rate (decimal)

n = the number of times that interest is compounded per unit t

t = the time the money is invested or borrowed for

Assuming interest is compounded annually, n = 1

`r = 7 \% = (7)/(100) = 0.07`

Substituting the values we get,

`A=1200\left(1+(0.07)/(1)\right)^(1 * 5)`

`\begin{aligned}&A=1200\left(1+(0.07)/(1)\right)^(1 * 5)\\\\&A=1200(1.07)^(5)\\\\&A=1200 * 1.402=1683.06\end{aligned}`

Thus the value of investment after 5 years is $ 1683.06