Question

In 2011 Staci invested $14,000 in a savings account for her newborn son. The account pays 3.4% interest each year. Determine the accrued value of the account in the year 2029, when her son will go to college. Round your answer the nearest cent.In the year 2029, the accrued value will be $

Answer 1

EXPLANATION

We need to use the Compounding Interest Equation as shown as follows:

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

Where P=Principal = 14,000 r=rate in decimal form = 3.4/100 = 0.034 n=number of times interest is compounded per unit 't' = 1 t= time = 2029 - 2011 = 18 years

Plugging in the terms into the expression:

$A=14,000(1+\frac{0.034}{18})^{1\cdot18}$

Adding numbers:

$A=14,000(\frac{9017}{9000})^{1\cdot18}$

Computing the power:

$A=14,000(1.034)$

Multiplying numbers:

$A=14,476$

In conclusion, in the year 2029 the value will be $14,476