A friend plans to buy a gaming system and can afford to set aside $1320 towards the purchase today.If your friend can earn 5.0%, compounded yearly, how much can your friend spend in four years on the purchase? Round off to the nearest $1.
A)$1444
B)$1604
C)$1764
D)$1283

Question

Quizplus · Accepted Answer

The future value of the investment can be calculated using the formula for compound interest: FV = P(1 + r)^n, where P is the principal amount ($1320), r is the annual interest rate (0.05), and n is the number of years (4). Plugging in the values, FV = 1320(1 + 0.05)^4 = 1320(1.21550625) ≈ $1604.

A Friend Plans to Buy a Gaming System and Can