Question

Suppose that when your friend was born, your friend’s parents deposited 60000 in an account paying 4.5% of interest compounded quarterly. What will the account balance be after 15 years?

Answer 1

$117,398.71

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 4.5% into a decimal:

4.5% ->
`(4.5)/(100)` -> 0.045

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

`A=60,000(1+(0.045)/(4))^(4(15))`

`A=117,398.71`

The account balance after 15 years will be $117,398.71