Answer:
The current value of the stamp collection is of $2,191.
Step-by-step explanation:
Compound interest:
The compound interest formula is given by:
[tex]A(t) = P(1 + \frac{r}{n})^{nt}[/tex]
Where A(t) is the amount of money after t years, P is the principal(the initial sum of money), r is the interest rate(as a decimal value), n is the number of times that interest is compounded per year and t is the time in years for which the money is invested or borrowed.
A stamp collection is purchased for $1,000.
This means that [tex]P = 1000[/tex]
The rate of return on the stamp collection is 4% per year
This means that [tex]n = 1, r = 0.04[/tex]
So
[tex]A(t) = P(1 + \frac{r}{n})^{nt}[/tex]
[tex]A(t) = 1000(1 + 0.04)^{t}[/tex]
[tex]A(t) = 1000(1.04)^{t}[/tex]
What is the current value of the stamp collection?
This is A(20). So
[tex]A(20) = 1000(1.04)^{20} = 2191[/tex]
The current value of the stamp collection is of $2,191.
Answer:
Step-by-step explanation:
y = 1000(1+0.04)^20
y = 1000(1.04)^20
Rounded to the nearest hundredth
y = 1000(2.19)
y = $2190
