Question

Penny received an unexpected $5,000.00 gift from a distant relative. She invests it

in a mutual fund that increases the value of the original investment by 8% each year.
You must show all calculations to earn credit.
How much will her original investment be worth in 10 years?

Answer 1

$9,000.00 is her original investment worth in 10 yrs.

5000 x 1.08 ^10 = 10794.6249864

Then subtract -500000 = 5794.62498636

Explanation:

Why, because the first year is proved 5000 x 0.08 = 400

= 400 year 1 but cna keep only if stays in investment for 10 years

400 x 10 = 4000 interest on investment

5000+ 4000 = $9,000.00 SI

+ 1,794.62 Interest on interest if applies (this is called CI) and makes $10794.62