Question

You invest $15,000 in a savings account with an annual interest rate of 2.5% in

which the interest is compounded quarterly. How much money should you expect to
have in the account after 5 years? Show your work to receive full credit!​

Answer 1

`\$16,990.62`

Explanation:

we know that

The compound interest formula is equal to

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

where

A is the Final Investment Value

P is the Principal amount of money to be invested

r is the rate of interest in decimal

t is Number of Time Periods

n is the number of times interest is compounded per year

in this problem we have

`t=5\ years\\ P=\$15,000\\ r=2.5\%=2.5/100=0.025\\n=4`

substitute in the formula above

`A=15,000(1+(0.025)/(4))^(4*5)`

`A=15,000(1.00625)^(20)`

`A=\$16,990.62`