Question

Juan's parents put $10,000 into a college education savings account. The account pays an interest rate of 7% compounded annually. If no further deposits or withdrawals are made, what will be the value of the original investment at the end of year 4? Round your answer to the nearest dollar.

A. $11,695
B. $11,960
C. $11,073
D. $11,225

Answer 1

The value of the original investment at the end of year 4 will be $13,034.

Step-by-step explanation:

To calculate the value of the original investment at the end of year 4, we use the formula for compound interest:

A = P(1 + r/n)^(nt),

where A is the final amount, P is the initial investment, r is the interest rate, n is the number of times the interest is compounded per year, and t is the number of years. In this case, P = $10,000, r = 7%, n = 1 (annually), and t = 4. Plugging these values into the formula, we get

A = 10000(1 + 0.07/1)^(1 * 4) = $13034.46.

Rounded to the nearest dollar, the value of the original investment at the end of year 4 will be $13,034.