To determine the accumulated balance after 5 years, we can use the compound interest formula:
A = P(1 + r/n)^(nt)
Where:
A = accumulated balance after the specified period
P = principal amount (the initial investment)
r = annual interest rate (expressed as a decimal)
n = number of times interest is compounded per year
t = time in years
In this case, the principal amount (P) is $10,000, the annual interest rate (r) is 10% or 0.10, and the time period (t) is 5 years. The question states that interest is compounded annually, so n is equal to 1.
Now we can plug these values into the formula:
A = 10000(1 + 0.1/1)^(1*5)
A = 10000(1 + 0.1)^5
A = 10000(1.1)^5
A = 10000(1.61051)
A ≈ $16,105.10
Therefore, the accumulated balance after 5 years is approximately $16,105.10.
Use the compound interest formula to determine the accumulated balance after the stated period. Assume that interest is compounded annually.
$10,000 is invested at an APR of 10% for 5 years.
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