Mr. Bert deposited $5,000 into an investment account with an annual interest rate of 3.75%. How much will his investment account be worth in 15 years?

A
$593,622.67

B
$77,812.50

C
$8,685.44

D
$5,050.26

1 answer

To calculate the future value of Mr. Bert's investment account, we can use the formula for compound interest:

\[ A = P(1 + r)^t \]

Where:

  • \( A \) is the amount of money accumulated after n years, including interest.
  • \( P \) is the principal amount (the initial amount of money).
  • \( r \) is the annual interest rate (decimal).
  • \( t \) is the number of years the money is invested or borrowed.

In this case:

  • \( P = 5,000 \)
  • \( r = 3.75/100 = 0.0375 \)
  • \( t = 15 \)

Now we can calculate:

\[ A = 5000 \times (1 + 0.0375)^{15} \]

Calculating inside the parentheses first:

\[ 1 + 0.0375 = 1.0375 \]

Now raising \( 1.0375 \) to the power of 15:

\[ 1.0375^{15} \approx 1.7137 \]

Now multiply by the principal:

\[ A \approx 5000 \times 1.7137 \approx 8568.50 \]

The correct value for Mr. Bert's investment account after 15 years is approximately $8,568.50.

This value is closest to option C: $8,685.44.

So the answer is C: $8,685.44.