Question

Suppose that you earned a​ bachelor's degree and now​ you're teaching high school. The school district offers teachers the opportunity to take a year off to earn a​ master's degreee. To achieve this​ goal, you deposit $ 5000 at the end of each year in an annuity that pays 6.5 % compounded annually.

a. After 5 ​years, you will have approximately= ​$

​(Do not round until the final answer. Then round to the nearest dollar as​ needed.)


b. The interest is approximately= ​$


​(Use the answer from part a to find this​ answer.)

Answer 1

Answer: a. After 5 ​years, you will have approximately= $ 6,850.43 .

b. The interest is approximately =$ 1850.43

Explanation:

Given: Principal amount (P) = $5000

Rate of interest (r)= 6.5% = 0.065

n= 1 (compounded annually)

a) Time (t) = 5 years

Formula for accumulated amount :

`A=P(1+\frac rn)^(nt)`

Then,

`A=5000(1+0.065)^5\\\\=5000(1.065)^5\\\\=5000(1.37008666342)\\\\\approx \$\ 6850.43`

Hence, After 5 ​years, you will have approximately $ 6,850.43 .

b) Compound interest = A-P

= $ 6,850.43 - $ 5,000

= $ 1850.43

Hence, The interest is approximately $ 1850.43.