You wish to make a substantial down payment on a lake cottage and you currently have $15,725 invested at an annual rate of 2.50%.How much money will be in the account in 3.5 years if it continues to earn at its present rate?
A)$18,325
B)$20,579
C)$17,144
D)$19,605

Question

Quizplus · Accepted Answer

The amount of money in the account after 3.5 years can be calculated using the formula for compound interest: A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount ($15,725), r is the annual interest rate (2.50% or 0.025 as a 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. Assuming the interest is compounded annually (n = 1), the formula simplifies to A = $15,725(1 + 0.025)^(1*3.5) = $15,725(1.025)^3.5 ≈ $17,144.

You Wish to Make a Substantial Down Payment on a Lake