Question

Your newborn daughter has received a total of $8000 in cash from various friends and relatives. If you deposit this money for her in an investment that returns an average return of 9.5% a year, how much will she have accumulated on her 21st birthday, to the nearest dollar? $16,590 $71,689 O $53,801 $23,960

Answer 1

Let y be the return on the investment.

Let P be the value at 21st bithday.

Hence, we have;

P = 8000 * (1+y)²¹

I.e. P = 8000*(1.095)²¹

I.e. P = 53800.522 = 53801 say.

Hence, option 3 is correct.