Question

Betty and Bill just won $10,000 in the Pennsylvania state lottery. They decide to spend $3,000 now and put the remaining $7,000 in an investment earning 8 percent compounded annually. If they use the money in that investment for a vacation in five years, approximately how much will they have available to spend on that vacation?

Answer 1

$10285.29

Explanation:

The idea is to solve for the final amount when $7000 is invested and compounded

given data

principal= $7000

rate= 8%= 0.08

time =5years

We know that the expression for the final amount is

`A = P(1 + {r)^(t)`

A = 7000(1 + {0.08)^5

A=7000(1.08)^5

A=7000(.469328)

A= 10285.29

They have available to spend on that vacation $10285.29