Michael Lynch invested $10,000 in the Rearguard Fund four years ago. All earnings were reinvested in the fund. If his compound annual rate of return was 7%, what is his investment worth today (round to the nearest dollar)?
A) $13,108
B) $10,700
C) $12,800
D) $763

Question

Quizplus · Accepted Answer

To calculate the investment's worth today, we use the formula A = P (1 + r/n) ^nt, where A is the final amount, P is the principal, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the time in years. In this case, P = $10,000, r = 7%, n = 1 (compounded annually), and t = 4. Plugging in the values, we get A = $10,000 (1 + 0.07/1) ^ (1x4) = $13,107.98, which when rounded to the nearest dollar, is $13,108. Therefore, the answer is A.

Michael Lynch Invested $10,000 in the Rearguard Fund Four Years