Narrative 11-1
Solve the following problems using either Tables 11-1 or 11-2 from your text. When necessary, create new table factors. (Round new table factors to five decimal places, round dollars to the nearest cent and percents to the nearest hundredth of a percent)
-Refer to Narrative in your text 11-1. Lane invests $7,000, at 7% interest, compounded annually for 22 years. Calculate the compound interest for his investment.
A) $31,012.80
B) $8,753.25
C) $24,012.80
D) $15,655.23

Question

Quizplus · Accepted Answer

The compound interest can be calculated using the formula for compound interest: A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount (the initial amount of money), r is the annual interest rate (decimal), n is the number of times that interest is compounded per year, and t is the time the money is invested for in years. Given that the interest is compounded annually, n = 1. Therefore, substituting P = $7,000, r = 7% or 0.07, n = 1, and t = 22 years into the formula gives A = $7,000(1 + 0.07/1)^(1*22) = $7,000(1 + 0.07)^22 ≈ $31,012.80. The compound interest earned is then $31,012.80 - $7,000 = $24,012.80.

Narrative 11-1 Solve the Following Problems Using Either Tables 11-1 or 11-2