Drexel Corporation has been enjoying a phenomenal rate of growth since its inception one year ago.Currently,its assets total $100,000.If growth continues at the current rate of 12 percent compounded quarterly,what will total assets be in 2¹/₂ years? A) $142,571 B) $126,678 C) $148,016 D) $136,855 E) $134,392

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Quizplus · Accepted Answer

To find the future value of the assets, we use the formula for compound interest: $A = P(1 + \frac{r}{n})^{nt}$, where $A$ is the amount of money accumulated after $n$ years, including interest, $P$ is the principal amount (the initial amount of money), $r$ is the annual interest rate (decimal), $n$ is the number of times that interest is compounded per year, and $t$ is the time the money is invested for in years. Given that $P = $100,000$, $r = 12\% = 0.12$, $n = 4$ (since the interest is compounded quarterly), and $t = 2$ years, we substitute these values into the formula to get $A = 100,000(1 + \frac{0.12}{4})^{4*2}$, which calculates to approximately $134,392.

Drexel Corporation Has Been Enjoying a Phenomenal Rate of Growth