use the compound interest formula to compute the balance in the following account after the stated period of time, assuming interest is compounded annually. 7000 dollars invested at an APR of 2.5% for 25 years. what is the balance in the account after 25 years

Solution

u se t h e co m p o u n d in t eres t f or m u l a t o co m p u t e t h e ba l an ce in t h e f o ll o w in g a cco u n t a f t er t h e s t a t e d p er i o d o f t im e, a ss u min g in t eres t i s co m p o u n d e d ann u a ll y . 7000 d o ll a rs in v es t e d a t an A PR o f 2.5% f or 25 ye a rs . w ha t i s t h e ba l an ce in t h e a cco u n t a f t er 25 ye a rs

Amount : 12977.61

Solution steps

Translate the problem into an equation:

A = 7000 (1 + \frac{0.025}{1})^{1 \cdot 25}

7000 (1 + \frac{0.025}{1})^{1 \cdot 25} = 12977.60868 \dots

Round to the nearest hundredth:

12977.61

Amount : 12977.61