Question

You plan to invest $2,500 in a money market account which will pay an annual stated interest rate of 8.75 percent, but which compounds interest on a weekly basis. If you leave this money on deposit for one year (52 weeks), what will be your ending balance when you close the account?

Answer 1

The ending balance when you close the account will be 2728,40

Step-by-step explanation:

The formula for compound interest, is:

A = P (1 + r/n) ^ (nt)

Where:

A = the future value of the investment/loan, including interest

P = the principal investment amount

r = the annual interest rate (decimal)

n = the number of times that interest is compounded per unit t

t = the time in years.

We are looking for A

P = $2,500

r = 0.0875

n = 52

t = 1

Replacing,

A = 2500 (1 + 0.0875/52) ^ (52*1)

A = 2500 (1 + 0.0875/52) ^ (52*1)

A = 2728,40