Question

A deposit of $10,000 is made in a trust fund that pays 3.8% interest, compounded quarterly. It is specified that the balance will be given to a charity after the money has earned interest for 40 years. How much will the charity receive?

A) Approximately $32,036.19
B) Approximately $25,100.00
C) Approximately $24,698.42
D) Approximately $30,235.30

Answer 1

The charity will receive approximately $24,698.42.

Step-by-step explanation:

To calculate the amount that the charity will receive, we will use the formula for compound interest:

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

Where A is the final amount, P is the principal amount (initial deposit), r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years.

Plugging in the given values:

A = $10,000(1 + 0.038/4)^(4*40)

A ≈ $24,698.42