Question

If $14,000 is invested in an account for 15 years. Find the value of the investment at the end of 15 years if the interest is: (a) 5% simple interest: $ ____(b) 5% compounded annually: $ _____Round your answers to the nearest cent.

Answer 1

(a)

For the simple interest we can use the following formula:

$A=P+P*r*t$

Where:

A = Amount after t years

P = Principal = $14000

t = 15

r = 5% = 0.05

so:

$\begin{gathered} A=14000+14000*0.05*15 \\ A=14000+10500 \\ A=24500 \end{gathered}$

Answer:

$24500

(b)

For the compound interest we can use the following formula:

$A=P\lparen1+r)^t$

Therefore:

$\begin{gathered} A=14000\left(1+0.05\right)^{15} \\ so: \\ A=29104.99 \end{gathered}$

Answer:

$29104.99