Question

How much would you have in 6 years if you purchased a $1,000 6 year savings certificate that paid 3% compound quarterly?(Round your your answer to the nearest cent.)

Answer 1

To solve this, we will apply the compound interest formula

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

Where

A = the amount of money realized

P = the principal sum of money = $1,000

r = interest rate = 3%

n = number of times compounded = 4, since it is quaterly

t = time = 6 years.

So, this becomes

`\begin{gathered} A=P(1+(r)/(n))^(nt) \\ \\ A=1000(1+(3)/(100*4))^(4*6) \\ \\ A=1000(1+0.0075)^(24) \\ A=1000(1.0075)^(24) \\ A=1000*1.1964 \\ A=1196.41\text{ dollars to the nearest cent } \end{gathered}`