225k views
3 votes
Tamira invests $5,000 in an account that pays 4% annual interest. How much will there be in the account after 3 years if the interest is compounded annually, semi-annually, quarterly, or monthly?

User Wolfgang
by
7.2k points

1 Answer

3 votes

Answer:

There will be $5624.32 in the account after 3 years if the interest is compounded annually.

There will be $5630.812 in the account after 3 years if the interest is compounded semi-annually.

There will be $5634.125 in the account after 3 years if the interest is compounded quarterly.

There will be $5636.359 in the account after 3 years if the interest is compounded monthly

Explanation:

Tamira invests $5,000 in an account

Rate of interest = 4%

Time = 3 years

Case 1:

Principal = 5000

Rate of interest = 4%

Time = 3 years

No. of compounds per year = 1

Formula :
A=P(1+r)^t


A=5000(1+0.04)^3

A=5624.32

There will be $5624.32 in the account after 3 years if the interest is compounded annually.

Case 2:

Principal = 5000

Rate of interest = 4%

Time = 3 years

No. of compounds per year = 2

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


A=5000(1+(0.04)/(2))^(2 * 3)

A=5630.812

There will be $5630.812 in the account after 3 years if the interest is compounded semi-annually.

Case 3:

Principal = 5000

Rate of interest = 4%

Time = 3 years

No. of compounds per year = 4

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


A=5000(1+(0.04)/(4))^(4 * 3)

A=5634.125

There will be $5634.125 in the account after 3 years if the interest is compounded quarterly.

Case 4:

Principal = 5000

Rate of interest = 4%

Time = 3 years

No. of compounds per year = 4

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


A=5000(1+(0.04)/(12))^(12 * 3)

A=5636.359

There will be $5636.359 in the account after 3 years if the interest is compounded monthly

User Callisto
by
8.3k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories