Question

You are investing $1500 at 6.2% compounded annually. How much money will you have in 12 years?

Answer 1

$3087.35

Explanation:

Compound interest formula

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

where:

• A = final amount
• P = principal
• r = interest rate (in decimal form)
• n = number of times interest applied per time period
• t = number of time periods elapsed

Given:

• P = $1500
• r = 6.2% = 0.062
• n = 1
• t = 12 years

Substituting given values into the equation and solving for A:

`\begin{aligned}\sf A & =\sf P \left(1+(r)/(n)\right)^(nt)\\\\\implies \sf A & = \sf 1500\left(1+(0.062)/(1)\right)^(1 * 12)\\\\& = \sf 1500(1.062)^(12)\\\\& = \sf \$ 3087.35 \: (nearest\:cent)\end{aligned}`