Question

If $5000 is invested at a rate of 3% interest compounded quarterly, what is the value of the investment in five years?

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

Answer 1

$5,805.92

Explanation:

Lets use the compound interest formula provided to solve this:

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

P = initial balance

r = interest rate (decimal)

n = number of times compounded annually

t = time

First, change 3% into a decimal:

3% ->
`(3)/(100)` -> 0.03

Since the interest is compounded quarterly, we will use 4 for n. Lets plug in the values now:

`A=5,000(1+(0.03)/(4))^(4(5))`

`A=5,805.92`

The value of the investment after 5 years will be $5,805.92