Question

You are depositing $4,500 today at an annual interest rate of 7.2 percent. How much additional interest will you earn if you leave the money invested for 45 years instead of 40 years?Multiple Choice1. $22,441.562. $6,370.693. $30,185.144. $25,723.085. $11,590.93

Answer 1

Answer:

$30,185.144

Explanation:

Deposit = $4,500

Annual Interest rate = 7.2%

Amount after 45 year = Deposit x ( 1 + interest rate )^45

Amount after 45 year = $4,500 x ( 1+ 7.2% )^45

Amount after 45 year = $4,500 x ( 1+ 0.072 )^45

Amount after 45 year = $4,500 x ( 1.072 )^45

Amount after 45 year = $102,796 .388

Amount after 40 year = Deposit x ( 1 + interest rate )^40

Amount after 40 year = $4,500 x ( 1+ 7.2% )^40

Amount after 40 year = $4,500 x ( 1+ 0.072 )^40

Amount after 40 year = $4,500 x ( 1.072 )^40

Amount after 40 year = $72,611 .252

Additional Interest = Amount after 45 year - Amount after 40 year

Additional Interest = $102,796.388 - 72,611.252

Additional Interest = $30,185.136