Thirteen years ago, you deposited $2,400 into an account. Eight years ago, you added an additional $1,000 to this account. You earned 8 percent, compounded annually, for the first 5 years and 5.5 percent, compounded annually, for the last 8 years. How much money do you have in your account today?

Question

Quizplus · Accepted Answer

We can break down the problem into two parts, the first 5 years and the last 8 years.

For the first 5 years, with an 8% interest rate compounded annually, the future value of the initial $2,400 deposit is:

$2,400 x (1 + 0.08)^5 = $3,586.88

For the last 8 years, with a 5.5% interest rate compounded annually, the future value of the $3,586.88 is:

$3,586.88 x (1 + 0.055)^8 = $6,946.59

Adding the additional $1,000 deposited 8 years ago, the total amount in the account today is:

$6,946.59 + $1,000 = $7,946.59

Therefore, the best choice is E with the explanation provided above.

Thirteen Years Ago, You Deposited $2,400 into an Account