Question

Nora inherited a savings account that was started by her grandmother 25 years ago. Her grandmother

deposited $500. The bank pays 5% interest per annum. Interest is paid every 3 months. Write an
equation that can be used to find the amount of money she has after 25 years

Answer 1

Answer:
`A = 500(1.0125)^(100)`

Explanation:

Compound interest

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

A is the final amount (what we are solving for)

P is the initial principal balance (P=500)

r is the interest rate as a decimal (r=0.05)

t is the time (25 years)

n is the number of times it is compounded yearly (every three months so n=4)

A = 500(1 + 0.05/4)^4(25)

A = 500(1 + 0.0125)^4(25)

A = 500(1.0125)^4(25)

A = 500(1.0125)^100