Question

Suppose your friends parents invest $25000 in an account paying 6% compounded annually. What will the balance be in 10 years

Answer 1

$44,771.19

Explanation:

We will use the compound interest formula to solve this:

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

P = initial balance

r = interest rate (decimal)

n = number of times compounded annually

t = time

First, lets change 6% into a decimal:

6% ->
`(6)/(100)` -> 0.06

Now, plug the values into the equation:

`A=25,000(1+(0.06)/(1))^(1(10))`

`A=44,771.19`

The balance after 10 years will be $44,771.19