Personal Financial Planning Practice Test

To determine how much Millie will have after 5 years when investing $3,000 at a 6% annual return, we can use the formula for compound interest, which is:

\[ A = P(1 + r)^n \]

Where:

- \( A \) is the amount of money accumulated after n years, including interest.

- \( P \) is the principal amount (the initial amount of money).

- \( r \) is the annual interest rate (decimal).

- \( n \) is the number of years the money is invested or borrowed.

In Millie's case:

- \( P = 3,000 \)

- \( r = 0.06 \) (which is 6% expressed as a decimal)

- \( n = 5 \)

Substituting the values into the formula, we have:

\[ A = 3,000(1 + 0.06)^5 \]

Calculating step-by-step:

1. Calculate \( (1 + 0.06) \), which equals 1.06.

2. Raise 1.06 to the power of 5, which gives approximately 1.338226.

3. Multiply by the principal amount:

\[ A