If a bank will pay 7% interest compounded annually on $2,500 deposited today, the depositor will receive how much at the end of 8 years?

Question

Quizplus · Accepted Answer

We can use the formula A=P(1+r/n)^(nt) where A is the amount at the end of the investment period, P is the principal (starting amount), r is the annual interest rate, n is the number of times interest is compounded in a year, and t is the number of years. Plugging in the values, we get A=2500(1+0.07/1)^(1*8)=4295.47. Therefore, the depositor will receive $4,295.47 at the end of 8 years.

If a Bank Will Pay 7% Interest Compounded Annually on $2,500