What is the future value of \$11 invested for 3 years at an annual interest rate of 5\% compounded annually?

• A. \$12.76
• B. \$13.00
• C. \$11.55
• D. \$12.10

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the formula for future value (FV) when interest is compounded annually. The formula is: FV = P × (1 + r)^n, where P is the principal amount, r is the annual interest rate (in decimal form), and n is the number of years.
2. Step 2: Identify the values given in the problem. Here, P = \$11, r = 5% (convert to decimal: 0.05), and n = 3 years.
3. Step 3: Substitute the values into the formula. Using MathML, the formula becomes: $\mathrm{FV}=P\times (1+r){}^{\mathrm{n}}$
4. Step 4: Perform the operations step by step. First, calculate (1 + r), then raise the result to the power of n, and finally multiply by P.
5. Step 5: Compare the calculated future value to the provided answer choices (\$12.76, \$13.00, \$11.55, \$12.10) to determine the correct answer.