Question

When Peggy Joe was born, her father deposited $2000 in a savings account in her name. At that time the bank was paying 6% interest compounded semiannually on saving accounts. After 10 years, the bank changed to an interest rate of 6% compounded quarterly. How much had the $2000 amounted to after 18 years when money was withdrawn for Peggy to use to help pay her college expenses?

Answer 1

Amount after 10 years is given by:

`2000(1+(0.06)/(2))^(20)=3612.22`
Amount after 18 years is given by:

`3612.22(1+(0.06)/(4))^(32)=5816.85`
The amount after 18 years was $5816.85.