Question

Ronna was listening to her parents talking about what a good deal compund interest was for a retirement account. She wondered how much money she would have if she invested $2000 at age 20 at 2. 8% annual interest compounded quarterly and left it until she turns age 65. Determine what the value of the $2000 would become?

Answer 1

To calculate the value of the $2000 investment after 45 years with a 2.8% annual interest compounded quarterly, we use the formula A = P(1 + r/n)
`^{(nt)`. The value of the $2000 investment would become $14054.83.

Step-by-step explanation:

To calculate the value of the $2000 investment after 45 years with a 2.8% annual interest compounded quarterly, we can use the formula:

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

Where:

A = The future value of the investment

P = The principal amount (initial investment)

r = Annual interest rate (as a decimal)

n = Number of times interest is compounded per year

t = Number of years

Plugging in the provided values into the formula:

A = 2000(1 + 0.028/4)⁽⁴×⁴⁵⁾

The value of the $2000 investment would become $14054.83.