Select the correct answer.
If the present value of an investment is $5,000, what will be its future value in three years if you apply a compound interest of 5 percent to it?
O A. $5770
OB. $5778
О с. $5877
D.
$5788



Answer :

To calculate the future value of an investment with compound interest, we use the formula: Future Value = Present Value * (1 + Interest Rate) ^ Number of Periods Here, the present value is $5,000, the interest rate is 5% (which is 0.05 in decimal form), and the time period is 3 years. Let's calculate the future value step by step: 1. Convert the interest rate from percentage to decimal: Interest Rate = 5% = 0.05 2. Add 1 to the interest rate: 1 + Interest Rate = 1 + 0.05 = 1.05 3. Raise this value to the power of the time period (3 years): (1 + Interest Rate) ^ Time Period = (1.05) ^ 3 4. Calculate this expression: (1.05) ^ 3 = 1.05 * 1.05 * 1.05 ≈ 1.157625 5. Multiply the present value by this calculated value: Future Value = Present Value * (1.05) ^ 3 Future Value = $5,000 * 1.157625 ≈ $5,788.125 Since we need to round to the nearest dollar, the future value is approximately: Future Value ≈ $5,788 So the answer is D. $5788.