Question

If Kelly deposits $10,000 into an account that pays 8 percent interest, compounded annually, and she makes no further deposits or withdrawals,
how much will Kelly have in her account at the end of 5 years?
A)$14,000.
B)$14,482.
C)$14,693.
D)$15,000.

Answer 1

Answer:

C) $14,693

Explanation:

Compound interest considers the return on investment (or interest) to be reinvested and provides return as well. Future value of principal value considering compound interest can be determined by below formula:

$FV = P(1+\frac{r}{n})^{nt}$

where

$FV = ?$ is the future value

$P = \ 10000$ is the principal amount invested

$r = 8\%$ is the rate of interest

$n= 1$ is the number of times interest is compounded within one time period

$t = 5 years$ is the number of time periods

$FV = P(1+\frac{r}{n})^{nt}$

$FV = 10000*(1+\frac{0.08}{1})^{1*5}$

$FV = \ 14693$