Question

A mother invests $2000 in a bank account at the time of her daughter's birth. The interest is compounded quarterly at a rate of 8%. What will be the value of the daughter's account on her twentieth birthday, assuming no other deposits or withdrawals are made during this period?

Answer 1

3696508354.42 $

Explanation:

P= 2000$

No of terms per year = 4

==> number of terms for the period= 4×20=80

Quarterly interest rate = 8

so yearly rate = 8/3×12=48%

We know formula for compound interest is;

A= P
`(1+(R)/(100) )^(T)`

Where,

A= amount required

P = principal or invested amount

R = rate of interest per year

T = number of terms for the period

Putting values

==> A =
`2000(1+(48)/(100)) ^(80)`

==> A= 2000
`(1.48)^(80)`

==> A = 2000(4.1776998×442409.523348)

==> A= 2000×1848254.17721

==> A= 3696508354.42 $