A principal of $3500 is invested at 6.25% interest, compounded annually. How much will the investment be worth after 8 years?

Use the calculator provided and round your answer to the nearest dollar.

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Answer :

To determine how much a principal of [tex]$3500 will be worth after 8 years when invested at an annual interest rate of 6.25% and compounded annually, we can employ the formula for compound interest: \[ A = P (1 + r/n)^{nt} \] where: - \( A \) is the future value of the investment/loan, including interest. - \( P \) is the principal investment amount (the initial deposit or loan amount). - \( r \) is the annual interest rate (decimal). - \( n \) is the number of times that interest is compounded per year. - \( t \) is the number of years the money is invested or borrowed for. Given: - \( P = 3500 \) dollars - \( r = 0.0625 \) - \( n = 1 \) (since the interest is compounded annually) - \( t = 8 \) years We can simplify the general formula to the form appropriate for annual compounding, which is: \[ A = P (1 + r)^t \] Substitute the given values into the formula: \[ A = 3500 (1 + 0.0625)^8 \] First, calculate the value inside the parentheses: \[ 1 + 0.0625 = 1.0625 \] Next, raise this value to the power of 8: \[ 1.0625^8 \approx 1.623313 \] Now multiply this result by the principal amount: \[ 3500 \times 1.623313 \approx 5684.595332 \] Rounding this resulting future value to the nearest dollar gives us: \[ 5685 \] Therefore, after 8 years, the investment will be worth approximately $[/tex]5685.