Question

Question

Gabe deposits $7,000 in a certificate of deposit. The annual interest rate is 4%, and the interest will be compounded
quarterly. How much will the certificate be worth in 5 years? Round your answer to two decimal places.

Answer 1

$8541.33

Explanation:

use the equation

`mv = p {(1 + (r)/(n) )}^(nt)`

MV = matured value

P = principal

r = yearly interest rate

n = number of periods the interest is compounded per year

t = terms in years

P = $7000

r = 0.04 ( 4% )

n = 4

t = 5

so it should be

`mv = 7000 {(1 + (0.04)/(4)) }^(4 * 5)`

Answer 2

$8,546.98 since you are rounding

Explanation:

Identify the values of each variable in the formulas. Remember to express the percent as a decimal.

A=?

P= $7,000

r=0.04

t=5

For monthly compounding, n=12. There are 12 months in a year.

A=P(1+rn)nt

Substitute the values in the formula.

A=7,000(1+0.0412)12⋅5

Compute the amount. Be careful to consider the order of operations as you enter the expression into your calculator.

A=$8,546.98