Question

Your parents put $300 into an account paying 11 percent interest for you when you were ten. Ten years later they tell you that you can take the money out of the account. What is the balance to the nearest penny

Answer 1

The balance in the account = $851.8

Step-by-step explanation:

The future value of a lump sum is the amount expected at a future date when a sum of money is invested today at a particular rate of interest for certain number of years

.

This implies compounding the initial amount invested ($300) at the given interest rate(11%) for 10 years.This will be done as follows:

FV = PV × (1+r)^(n)

FV-Future value

r- rate of return per period

n- Number of period

PV - 300

r-11%

DATA

FV- ?

PV - 300

n- 10

FV= 300 × 1.11^10 = 851.83

The balance in the account = $851.8