Word Problem

Question

The value V , in dollars, of an investment in year t is given by V = 2500(1.0325)t. Describe the investment in words.

Answer 1

I believe the formula that you meant to state is

 

V = 2500(1.0325)^t

 

 

The formula of any compound interest is
 
A = P(1 + (r/n))^nt

 

 

where:

V = amount accumulated

P = investment = 2500

r = interest rate in decimal = 0.0325

t = time

n = number of times compounded per year = 1

 

 

The initial investment is $2500 that is compounded annually with an interest rate of 3.25%.