Question

If you deposit $8,000 in a bank account that pays 10% interest annually, how much will be in your account after 5 years? Do not round intermediate calculations. Round your answer to the nearest cent.

Answer 1

Explanation:

Assuming the interest was compounded annually, we would apply would apply the formula for determining compound interest which is expressed as

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

Where

A = total amount in the account at the end of t years

r represents the interest rate.

n represents the periodic interval at which it was compounded.

P represents the principal or initial amount deposited

From the information given,

P = 8000

r = 10% = 10/100 = 0.1

n = 1 because it was compounded ince in a year.

t = 5 years

Therefore,

A = 8000(1+0.1/1)^1 × 5

A = 8000(1.1)^5

A = $12884.1

Answer 2

$12,884.08

Explanation:

Assuming that interest is compounded annually, the future value of an invested amount 'P', at an interest rate 'r' for a period of 'n' years is given by the following equation:

`FV = P*(1+r)^n`

Therefore, an investment of $8,000 at a rate of 10% per year for 5 years has a future value of:

`FV = 8,000*(1+0.1)^5\\FV=\$12,884.08`

There will be $12,884.08 in the account after 5 years.