Question

George’s parents are saving for his college fund. They put $5,000 into an interest bearing account with a compound interest rate of 5.5%. George’s parents want to determine what the balance of his college fund account will be after 15 years. Using the formula A = P (1 + r) Superscript t, which is the correct substitution for the formula?

A = 5,000 (1 + 0.055) Superscript 15
A = 5,000 (1 + 0.055) 15
A = 5,000 (1 + 0.015) Superscript 5.5
A = (5,000 + 0.055) + 1 Superscript 15

Answer 1

A = 5,000(1 + 0.055)^15

Reason: P = 5000, r = 0.055 (5.5%), t = 15. Evaluating gives A = 5000(1.055)^15 ≈ $11,162.37.