If a $10,000 investment earns a 7% annual return, what should its value be after 6 years?

Question

Quizplus · Accepted Answer

We can solve this problem using the formula for compound interest:

A = P(1 + r/n)^(nt)

Where:
A = the ending value of the investment
P = the initial investment (or principal)
r = the annual interest rate (as a decimal)
n = the number of times the interest is compounded per year
t = the number of years

In this case, we have:
P = $10,000
r = 7% = 0.07
n = 1 (compounded annually)
t = 6 years

Plugging these values into the formula, we get:

A = $10,000(1 + 0.07/1)^(1*6)
A = $10,000(1.07)^6
A = $15,011.28

Rounded to the nearest dollar, the investment should have a value of $15,010 after 6 years. Therefore, the answer is D.

If a $10,000 Investment Earns a 7% Annual Return, What