How much additional income could he earn if he had invested this amount at 7 percent, compounded annually?

Today, Tony is investing $16,000 at 6.5 percent, compounded annually, for 4 years. How much additional income could he earn if he had invested this amount at 7 percent, compounded annually?

Group of answer choices

$323.22
$389.28
$401.16
$442.79
$484.08

Expert Solution

Option 2

Future value=Principal invested*(1+interest)^number of years

At 6.5%, value=$16000*(1.065)^4

=$20583.46

At 7%, value=$16000*(1.07)^4

=$20972.74

Hence additional income=value at 7%-value at 6.5%=$20972.74-$20583.46=$389.28

jeff jeffy answered 2 years ago

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