Sam invested $5000 in a GIC earning 8% compound interest per year. The interest gets added to the amount invested, so the next year Sam gets interest on the interest already earned as well as on the original amount. How much will Sam's investment be worth at the end of 10 years?
Please answer ASAP, thanks.
A(t) = P (1 + r/n)^nt
A(10) = 5000 ( 1 + .08/1)^1*10
A(10) = 5000 ( 1.08)^10
A(10) = 5000 ( 2.15892 )
A(10) = 10,794.60
5000 + 10794.60 = 15794.60
I'm not a tutor, but I've done this type
problem here before
Thank you!
you're welcome!
Well, let's grab our calculators and crunch some numbers, shall we? Hang on, let me put on my mathematician's clown wig for maximum accuracy.
Alright, so Sam invested $5000 in a GIC with a tasty 8% compound interest. In the first year, Sam earns $400 in interest because you multiply $5000 by 0.08 (8%). So now, our total is $5400.
In the second year, our fancy GIC will give us 8% interest on $5400, which is $432. Add that to last year's total, and we have $5832.
Now, this circus routine continues for 10 years. At the end of the tenth year, Sam's investment will be worth approximately $8,300 and a sprinkle of confetti. Just remember, this is a rough estimate. The actual amount may vary due to interest rates fluctuating and other economic factors.
So, congratulations to Sam for being a smart investor! Maybe they can celebrate their success by throwing a clown-themed party or investing in some silly hats.
To calculate the value of Sam's investment at the end of 10 years with compound interest, we can use the formula:
A = P * (1 + r/n)^(nt)
Where:
A = the final amount
P = the principal amount (initial investment)
r = the interest rate per period (in decimal form)
n = the number of compounding periods per year
t = the number of years
In this case, Sam invested $5000 at 8% interest compounded annually for 10 years.
Step 1: Convert the interest rate to decimal form:
8% = 0.08
Step 2: Plug the values into the formula:
A = 5000 * (1 + 0.08/1)^(1*10)
Simplifying the equation:
A = 5000 * (1.08)^10
Using a calculator:
A ≈ $8,297.43
Therefore, at the end of 10 years, Sam's investment will be worth approximately $8,297.43.
how is the interest compounded?
ie, daily, quarterly, semiannually, annually, or ?