Question

Pedro Gonzalez will invest $5,000 at the end of each year. If the interest rate is 8%, what will the value be after three years?

A. $12,885

B. $6,300

C. $16,230

D. $15,400

Answer 1

			The correct answer is option (c ) i.e. $16,230 which is calculated as below:-
			1st year end investment = 5,000
			Value at the end of 3rd year = (5000*1.08*1.08) = 5,830
			2nd year end investment = 5,000
			Value at the end of 3rd year = (5000*1.08) = 5,400
			3rd year end investment = 5,000
			Value at the end of 3rd year = 5,000
			Therefore, value after three years = (5,830+5,4000+5,000) = 16,230