Question

4. An investment account pays 4.6%

annual interest compounded quarterly.
If $6050 is placed in this account, find
the balance after 6 years.
A. $6810.53
B. $7420.65
C. $7960.43
D. $8134.22

Answer 1

Explanation:

Use the formula

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

where A(t) is the amount after all the compounding is done, P is the initial investment, r is the interest rate as a decimal, n is the number of times the investment is compounded each year, and t is time in years. For us,

P = 6050

r = .046

n = 4

t = 6

A(t) = ?

Filling in our given info:

`A(t)=6050(1+(.046)/(4))^((4)(6))`

which simplifies to

`A(t)=6050(1+.0115)^(24)`

which simplifies a bit more to

`A(t)=6050(1.0115)^(24)` and

A(t) = 6050(1.31577397) so

A(t) = $7960.43

which is choice C