An employee put $8,500.00 in a retirement account that offers 6% 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 15 years?
$11,870.74
$16,150.00
$7,650.00
$16,150.00
To calculate the amount of interest earned at the end of 15 years, you can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the investment/retirement account
P = the principal amount (initial deposit), which is $8,500.00
r = the annual interest rate, which is 6% or 0.06
n = the number of times the interest is compounded per year, which is 1 for annually
t = the number of years the money is invested for, which is 15 years
Plugging in the values:
A = $8,500(1 + 0.06/1)^(1*15)
A = $8,500(1.06)^15
A = $16,149.97
Therefore, the amount closest to the interest earned at the end of 15 years is $16,150.00.