Question

Heather invested $8,000 4-year savings bond that pays 4.1% interest compounded annually. What is the value of the savings bond at the end of the 4 years?

Answer 1

`FV=$9,394.92`

Explanation:

Future amount at the end of 4 years will be calculated using the standard formula as follows:

`FV=P(1+i)^n`
where:
`FV="future value"`
`P="principal"=$8,000`
`i="interest rate"=4.1%=0.041`
`n="number of years"=4`

Now plug in provided data to the formula:

`FV=P(1+i)^n`

`FV=$8,000(1+0.041)^4`

`FV=$8,000(1.041)^4`

`FV=$8,000(1.17436450976)`

`FV=$9,394.92`

This means that the amount of $8,000 will earned an interest of $1,394.92 at an interest rate of 4.1% compounded annually.