John invested $25000 in a savings account that earns an annual interest rate of 8%, compounded annually. How much money will he have after 3 years?Question 18Answera.$31492.8b.$31592.8c.$31692.8d.$31392.8
Question
John invested 31492.8b.31692.8d.$31392.8
Solution
The formula for compound interest is A = P(1 + r/n)^(nt), where:
- A is the amount of money accumulated after n years, including interest.
- P is the principal amount (the initial amount of money).
- r is the annual interest rate (in decimal).
- n is the number of times that interest is compounded per year.
- t is the time the money is invested for in years.
In this case, John invested $25000 (P) at an annual interest rate of 8% (r = 0.08), compounded annually (n = 1), for 3 years (t = 3).
So, the amount of money (A) accumulated after 3 years is:
A = 25000(1 + 0.08/1)^(1*3) A = 25000(1 + 0.08)^3 A = 25000 * 1.08^3 A = 25000 * 1.259712 A = $31492.8
So, the correct answer is a. $31492.8.
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