On your first through fifth birthdays your parents placed $2,000 into your college fund (five total deposits of $2,000 each).The account has earned an average of 8.0% per year until today,your twentieth birthday.How much money is in the account today?
A)$11,733.20
B)$37,219.70
C)$12,671.86
D)$25,383.41

Question

Quizplus · Accepted Answer

We can solve this problem using compound interest formula which is:
A=P(1+r/n)^(nt)
where,
A=Final amount
P=Principal amount
r=Rate of interest
n=Number of times interest is compounded per year
t=Time period in years

Here, P=$10,000 (sum of 5 deposits of $2,000 each)
r=8%
n=1 (interest is compounded annually)
t=15 (20-5)

Putting values in the formula, we get:
A=$10,000(1+0.08/1)^(1*15)
A=$37,219.70

Therefore, the best choice is B.

On Your First Through Fifth Birthdays Your Parents Placed $2,000