As a savings plan for college, when their son Bob was born, the Wilburs deposited $10,000 in an account paying 8% compounded annually. How much will the account be worth when Bob is 18 years old?
Same structure as the one I just did for you.
Try it, let me know what you got.
To find the amount the account will be worth when Bob is 18 years old, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the account
P = the principal amount (initial deposit)
r = the annual interest rate (expressed as a decimal)
n = the number of times interest is compounded per year
t = the number of years
In this case:
P = $10,000
r = 8% = 0.08 (as a decimal)
n = 1 (compounded annually)
t = 18 years
Plugging these values into the formula, we have:
A = $10,000(1 + 0.08/1)^(1*18)
A = $10,000(1 + 0.08)^18
A = $10,000(1.08)^18
Calculating this expression:
A ≈ $32,071.85
Therefore, the account will be worth approximately $32,071.85 when Bob is 18 years old.