SOLUTION: this year, thomas decides to take 10% of what is left over from is annual earnings and decides to invest it in a savings account that is paying 3.5% interest per year. what is thom

Question 1151705: this year, thomas decides to take 10% of what is left over from is annual earnings and decides to invest it in a savings account that is paying 3.5% interest per year. what is thomas' investment worth after 5 years
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
let x equal what is left over from his annual earnings.
he invests that at 3.5% interest per year for 5 years, compounded annually.
the future value of the investment is equal to x * 1.035 ^ 5 = 1.187686306 * x.
that means that the investment was worth 1.187686306 times as much after 5 years.

for example, assume thomas makes an annual income of 50,000 per year.
assume that what is left over from that annual income is 10,000.
he takes 10% of that and invests it at 3.5% per year for 5 years.
10% of 10,000 is equal to 1,000 * 1.035^5 = 1187.686306.
that's how much his investment is worth after 5 years if the investment was 1,000.

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