Jim Mayer has deposited $7,000 in a guaranteed investment account with a promised rate of 7% compounded annually. He plans to leave it there for 4 full years when he will make a down payment on a car after graduation. How much of a down payment will he be able to make?
A) $8,960.00
B) $1,960.00
C) $2,175.57
D) $9,175.57

Question

Quizplus · Accepted Answer

The future value of Jim's investment can be calculated using the formula for compound interest: $FV = P(1 + r)^n$, where $FV$ is the future value, $P$ is the principal amount ($7,000), $r$ is the annual interest rate (7% or 0.07), and $n$ is the number of years (4). Plugging in the values, we get $FV = 7000(1 + 0.07)^4$, which calculates to approximately $9,175.57.

Jim Mayer Has Deposited $7,000 in a Guaranteed Investment Account