An employee put $4,000.00 in a retirement account that offers 8% interest compounded annually. The employee makes no additional deposits or withdrawals. Which amount is closest to the interest the employee will have earned at the end of 6 years?

Answer 1

To find the interest earned at the end of 6 years, we can use the formula:

A = P(1+r)^t

Where:
A is the amount after t years
P is the initial principal (in this case, $4,000.00)
r is the interest rate (in this case, 8% or 0.08)
t is the time in years (in this case, 6 years)

Plugging in the values, we get:

A = 4000(1+0.08)^6

A ≈ $6,832.20

To find the interest earned, we subtract the initial principal from the final amount:

Interest = A - P
Interest = $6,832.20 - $4,000.00
Interest ≈ $2,832.20

Therefore, the amount closest to the interest the employee will have earned at the end of 6 years is $2,832.20.