Question

Jenny deposited $5000 into an account that earned a 4% annual interest rate compounded quarterly. How much money will be in the account after 10 years, assuming no other deposits or withdrawals?

Answer 1

To calculate the future value of an investment with compound interest, use the formula A = P(1 + r/n)^(nt). In this case, the future value is $7443.04.

Step-by-step explanation:

To calculate the future value of an investment with compound interest, we use the formula:

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

Where:

• A is the future value
• P is the principal amount ($5000 in this case)
• r is the annual interest rate (4%)
• n is the number of times interest is compounded per year (4 for quarterly compounded interest)
• t is the number of years (10 in this case)

Plugging the values into the formula:

A = 5000(1 + 0.04/4)^(4*10)

Simplifying the formula:

A = 5000(1.01)^40

A = 5000(1.4886)

A = $7443.04