Question

If you invest $1500 in at an interest rate of 7% for 5 years and the interest is compounded quarterly, how much money will you have after the 5 years? Round your answer to the nearest cent.

Answer 1

$2122.17 (correct to the nearest cent).

Step-by-step explanation:

To find the amount after 5 years, we use the compound interest formula below:

`\begin{gathered} A=P(1+(i)/(k))^(nk) \\ \text{Principal, P}=1500 \\ Interest\text{ Rate, i =7\%} \\ \text{Period, k=4 (Quarterly)} \\ \text{Number of years, n=5} \end{gathered}`

Substitute the given values:

`\begin{gathered} A=1500(1+(0.07)/(4))^(4*5) \\ =1500(1+0.0175)^(20) \\ =1500(1.0175)^(20) \\ =\$2122.17 \end{gathered}`

After 5 years, you will have $2122.17 (correct to the nearest cent).