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

The Amount which should be expected in the account after 5 years is $ 16,990.5

Explanation:

Given as :

The investment amount in saving account = $ 15,000

The annual rate of interest = 2.5 % compounded quarterly

The time period = 5 years

Let the amount in account after 5 years = $ A

From compounded method

Amount = Principal ×
`( 1 +(\textrm Rate)/(100* 4))^(4* \textrm Time)`

or, Amount = $ 15,000 ×
`( 1 +(\textrm 2.5)/(100* 4))^(4* \textrm 5)`

or, A = $ 15,000 ×
`(1.00625)^(20)`

Or, A = $ 15,000 × 1.1327

∴ A = $ 16,990.5

So, Amount = A = $ 16,990.5

Hence The Amount which should be expected in the account after 5 years is $ 16,990.5 Answer