Multiple choice

Emily wants to save for a new car. She decides to invest $3,500 at an annual interest rate of 4%, compounded annually. She plans to check the value of her investment after 5 years. What should be the approximate value of Emily's investment at the end of 5 years?

  1. $4,000
  2. $4,120
  3. $4,260
  4. $4,300
  5. $4,340
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Compound interest formula: A = P(1 + r/100)^n = 3500 * (1.04)^5. 1.04^5 is approximately 1.21665. 3500 * 1.21665 = 4258.275. This is closest to 4260.

AI explanation

Using the compound interest formula, the future value is calculated as the principal multiplied by one plus the rate, all raised to the power of the number of years. Substituting the given values gives 3500 multiplied by 1.04 to the fifth power. This calculates to an approximate total value of $4,260 at the end of the 5 years.

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