Question

When his first child was born, a father put $3000 in a savings account that pays 4% annual interest, compounded quarterly. How much will be in the account on the child's 18th birthday? Answer rounded to the whole number

Answer 1

$6141

Explanation:

We can use the formula for compound interest to find the amount in the account after 18 years:

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

Where:

A = the amount in the account after 18 years

P = the principal amount (initial deposit) = $3000

r = the annual interest rate = 4% = 0.04

n = the number of times the interest is compounded per year = 4 (quarterly)

t = the time in years = 18

Plugging in these values, we get:

A = 3000(1 + 4%/4)^(4*18)

A = 3000(1.01)^72

A = 3000*2047

A = 6141

Rounding to the nearest whole number, we get:

A = $6141

Therefore, there will be $6141 in the account on the child's 18th birthday.