Question

Suppose an investment of $25,000 is invested at an annual rate of 9.3%, and interest is compounded 4 times a year. What is the value of the account after 16 years? Round your answer to the nearest cent/penny.

Answer 1

The value of the account after 16 years is $108,835.91

Step-by-step explanation:

We need to use the compound interest formula:

`A=P\left(1+(r)/(n)\right)^(nt)`

Where:

A is the value of the account after 16 years, so the unknown

P is the investment of $25,000

r is the annual rate of 9.3% in decimal form, thus 0.093 (that is 9.3/100)

n is the number of times the interest is compounded per year, thus 4

t is the number of years thus 16

The formula becomes:

`A=25000\left(1+(0.093)/(4)\right)^(4(16))`

Once we enter that into the calculator, we get:

`A = 108835.91203`

Then we round to the nearest cent, that is to two decimal places and we get $108,835.91 is the value of the account after 16 years.