SOLUTION: Directions: Use the compound interest formulas A=P(1+r/n )^nt and A=pe^rt to solve. Find the accumulated value of an investment of $850 at 4% compounded annually for 17 ye

Algebra ->  Quadratic Equations and Parabolas -> SOLUTION: Directions: Use the compound interest formulas A=P(1+r/n )^nt and A=pe^rt to solve. Find the accumulated value of an investment of $850 at 4% compounded annually for 17 ye      Log On


   

Question 363931: Directions:
Use the compound interest formulas A=P(1+r/n )^nt and A=pe^rt to solve.

Find the accumulated value of an investment of $850 at 4% compounded annually for 17 years.
Can someone show me what steps I need to use to find the answer?
Thanks!
Answer by jrfrunner(365) About Me  (Show Source):
You can put this solution on YOUR website!
Both of these formulas are for computed compounded interest. A=P%281%2Br%2Fn+%29%5Ent+ will approach the formula A=pe%5Ert in the limit as n approaches infintity. In other words limit as n-->infinity %281%2Br%2Fn+%29%5En+=e%5Er
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n = number of periods to compound, P is the principal invested, r=annual rate and t=number of years.
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In your case n=1 since you are compounding once a year and therefore you need to use the formula A=P%281%2Br%2Fn+%29%5Ent+. The other formula would only be valid if you were compounding over very granular periods (ie days or hours) or n is very large.
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given
n=1 compounded annually, p=850, r=4% or 0.04 and t=17

A=P%281%2Br%2Fn+%29%5E%28nt%29+=850%2A%281%2B%28.04%2F1%29%29%5E%281%2A17%29=850%2A%281.04%29%5E17=1655.72+++