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Question & Answer: At the end of the 10 years, Alan withdraws the accumulated amount of money…..

Alan Jackson invests $37,700 at 10% annual interest, leaving the money invested without withdrawing any of the interest for 10 years. At the end of the 10 years, Alan withdraws the accumulated amount of money.
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(a)

Correct answer. Your answer is correct.

Compute the amount Alan would withdraw assuming the investment earns simple interest. (Round answers to 0 decimal places, e.g. 458,581.)

Total withdrawn $Entry field with correct answer
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(b)

(Use the table below.)


Compute the amount Alan would withdraw assuming the investment earns interest compounded annually. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Total withdrawn $

Expert Answer

 

1.Computation of the amount Alan would withdraw assuming the investment earns simple interest

Simple interest formula = PTR/100

here principle = $37,700

time = 10years

interest rate = 10%

simple interest = (37,700 * 10 * 10)/100 = $ 37,700

Total amount can be withdrawn by alan = (principle = simple interest) = 37,700 + 37,700 =$ 75,400

2.Compute the amount Alan would withdraw assuming the investment earns compound interest:

compound interest formula = p(1+r/100)n

= 37,700(1+10/100)10

= 37,700(11/10)10

= 37,700(1.1)10

   = 37,700 * 2.5937

= $ 97,784

Total amount can be withdrawn by alan    = $ 97,784.09

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