92.1k views
0 votes
What is the accumulated amount of a $5,000 investment for 7 years at an interest rate of 6% if the money was:

1) invested using simple interest
2) compounded daily
3) compounded semiannually
4) compounded quarterly
5) compounded monthly
6) compounded weekly
7) compounded daily

1 Answer

6 votes

Final answer:

The accumulated amount of a $5,000 investment over 7 years at 6% interest varies depending on the type of interest. For simple interest, the accumulated amount is $7,100. For compound interest, various frequencies of compounding result in different accumulated amounts, calculated using the compound interest formula.

Step-by-step explanation:

To calculate the accumulated amount of a $5,000 investment for 7 years at an interest rate of 6%, we'll look at simple interest and various compound interest scenarios.

Simple Interest: The formula for simple interest is I = P × r × t, where P is the principal amount, r is the rate of interest per year, and t is the time in years. For a $5,000 investment at 6% for 7 years, the total interest would be I = $5,000 × 0.06 × 7. So, the total interest earned would be $2,100, making the accumulated amount $7,100.

The formula for compound interest is A = P(1 + r/n)nt, where A is the future value of the investment, P is the principal, r is the annual interest rate (decimal), n is the number of times that interest is compounded per year, and t is the time the money is invested for in years.

  1. Compounded Daily: n = 365, so A = $5,000(1 + 0.06/365)365×7.
  2. Compounded Semiannually: n = 2, so A = $5,000(1 + 0.06/2)2×7.
  3. Compounded Quarterly: n = 4, so A = $5,000(1 + 0.06/4)4×7.
  4. Compounded Monthly: n = 12, so A = $5,000(1 + 0.06/12)12×7.
  5. Compounded Weekly: n = 52, so A = $5,000(1 + 0.06/52)52×7.
  6. Again for Compounded Daily for your reference.

In each case, you would need to calculate the expression using a calculator to find the accumulated amounts.

User Dilson
by
8.2k points

No related questions found

Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories