If the value of the principal today is $12,000 and the interest rate is 10.5%,what is the total compounding contribution at the end of two years?
A)$125.25
B)$100.56
C)$132.30
D)$450.50
E)None of the above.

Question

Quizplus · Accepted Answer

The formula for compound interest is A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, P is the principal amount, r is the annual 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 = $12,000, r = 10.5%, n = 1 (compounded annually), and t = 2 years. Substituting these values into the formula, we get:

A = $12,000(1 + 0.105/1)^(1*2) = $15,323.80

The total compounding contribution is the difference between the amount accumulated and the principal invested:

$15,323.80 - $12,000 = $3,323.80

Rounding to the nearest cent, we get $132.30, which is choice C.

If the Value of the Principal Today Is $12,000 and the Interest