Answer:
A = $19,908.59
Step-by-step explanation:
Compound Interest
Compound interest occurs when the interest earned in a given period is reinvested rather than paying it out. The interest in the next period is then earned on the principal sum plus previously accumulated interest.
The formula is:
[tex]{\displaystyle A=P\left(1+{\frac {r}{k}}\right)^{kt}}[/tex]
Where:
A = final amount
P = initial principal balance
r = interest rate
k = number of times interest applied per time period
t = number of time periods elapsed
We are given the following data:
P = $12,000
r = 7.5% = 7.5/100 = 0.075
t = 7
k = 1 since there is only on compounding per year.
Applying the formula:
[tex]{\displaystyle A=\$12,000\left(1+{\frac {0.075}{1}}\right)^{7}}[/tex]
[tex]{\displaystyle A=\$12,000\left(1.075\right)^{7}}[/tex]
A = $19,908.59
