Question

Susan Altidore invested $8,000 at 6% annual interest, and left the money invested without withdrawing any of the interest for 14 years. At the end of the 14 years, Susan withdrew the accumulated amount of money.


(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

(a) What amount did Susan withdraw, assuming the investment earns simple interest?

The amount Susan withdrew		$enter the withdrawn amount in dollars rounded to 5 decimal places

(b) What amount did Susan withdraw, assuming the investment earns interest compounded annually? (Round answer to 2 decimal places, e.g. 25.25.)

The amount Susan withdrew		$enter the withdrawn amount in dollars rounded to 2 decimal places

Answer 1

Answer:

(a)

Interest amount       = Principal x rate of interest x Time period       =    $ 8,000 x 6% x 14 years       =    $ 6,720

Accumulated amount   = Invested Amount + Interest Amount                                                =   $ 8,000 + $ 6,720                                                 =   $ 14,720

Amount Susan withdraw = $ 14,720

(b)

Amount Susan withdraw                  =   Invested Amount x ( 1 + Rate ) ^ Time period                  =    $ 8,000 x ( 1 + 6% ) ^ 14                  =   $ 8,000 x 2.26090                  =    $ 18,087.20

Amount Susan withdraw = $ 18,087.20