To what value would $20,000 compound in five years, assuming an annual discount rate of 5%?
A) 25,526
B) 21,000
C) 20,000
D) 19,048

Question

Quizplus · Accepted Answer

To find the future value of an investment using compound interest, we can use the formula:

FV = PV x (1 + r)^n

where 
PV = present value (the initial investment amount)
r = annual interest rate (as a decimal)
n = number of years

In this case, the present value is $20,000, the annual interest rate is 5% (or 0.05 as a decimal), and the number of years is 5. So we can plug these values into the formula and solve for FV:

FV = $20,000 x (1 + 0.05)^5
FV = $20,000 x 1.27628
FV = $25,525.60

However, the answer options are rounded differently. The closest option to the calculated value is A, which is $25,526. Therefore, the best choice is A.

To What Value Would $20,000 Compound in Five Years, Assuming