Question

The relative growth rate for a certain type of mutual fund is 15% per year. An account is opened with a balance of $3,000. How much is the mutual fund worth in 5 years? In your final answer, include all of your calculations.

Answer 1

We have been given that an account is opened with a balance of $3,000 and relative growth rate for a certain type of mutual fund is 15% per year.  

In order to tackle this problem we have to find the value of mutual fund after 5 years. For our purpose we will use compound interest formula.

$A=P(1+r)^{t}$ ,where A= amount after t years, P= principal amount, r= interest rate (decimal) and t= number of years.

After substituting our given values in above formula we will get

$A=3000(1+.15)^{5}$

Now we will solve for A

$A=3000(1+.15)^{5}=3000(1.15)^{5}\\ A=3000\cdot (2.011357187)=6034.07$

Therefore, after 5 years mutual fund is worth $6034.07.