Question

Suppose that $1200 is invested at 612%, compounded quarterly. How much is in the account at the end of 5 years?

Round your answer to the nearest cent.
Do NOT round until you calculate the final answer.
Do not include the dollar sign.

Answer 1

1,656.50

Explanation:

Here, the principal is P=$1200, the interest rate is r=612%=0.065, and because the interest is compounded quarterly, n=4. The investment is modeled by the following,

A(t)=1200(1+0.0654)(4)t

To determine the amount in the account after 5 years evaluate A(5) and round to the nearest cent.

A(5)===1200(1+0.0654)4(5)1200(1.01625)201656.50

The CD will be worth $1,656.50 at the end of the 5-year term.

Answer 2

`\$1,656.50`

Explanation:

we know that

The compound interest formula is equal to

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

where

A is the Final Investment Value

P is the Principal amount of money to be invested

r is the rate of interest in decimal

t is Number of Time Periods

n is the number of times interest is compounded per year

in this problem we have

`t=5\ years\\ P=\$1,200\\ r=6(1)/(2)\%=6.5\%=6.5/100=0.065\\n=4`

substitute in the formula above

`A=1,200(1+(0.065)/(4))^(4*5)`

`A=1,200(1.01625)^(20)`

`A=\$1,656.50`