Question

If $6000 is invested in a certificate of deposit for 6 years at an annual rate of 4.5% how much money will be in the account if the interest rate is compounded weekly? Round to the nearest penny

Answer 1

The compounding interest formula is :

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

where A is the future amount

P is the principal or initial amount

r is the interest rate

n is the number of compounding

t is the time in years

From the given problem,

P = $6,000

r = 4.5% or 0.045

n = 52 (Compounded weekly)

there are 52 weeks in a year.

t = 6 years

Using the formula above, the future amount will be :

`\begin{gathered} A=6000(1+(0.045)/(52))^(52(6)) \\ A=6000(1+(0.045)/(52))^(312) \\ A=7858.87 \end{gathered}`

The answer is $7858.87