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?
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.