Question

Suppose an investment of $25,000 is invested at an annual rate of 9.3%, and interest is compounded 4 times a year. What is the value of the account after 16 years? Round your answer to the nearest cent/penny.

Answer 1

Answer:  

The value of the account after 16 years is $108,835.91

Explanation:

We need to use the compound interest formula:

$A=P\left(1+\frac{r}{n}\right)^{nt}$

Where:

A is the value of the account after 16 years, so the unknown

P is the investment of $25,000

r is the annual rate of 9.3% in decimal form, thus 0.093 (that is 9.3/100)

n is the number of times the interest is compounded per year, thus 4

t is the number of years thus 16

The formula becomes:

$A=25000\left(1+\frac{0.093}{4}\right)^{4(16)}$

Once we enter that into the calculator, we get:  

$A = 108835.91203$

Then we round to the nearest cent, that is to two decimal places and we get $108,835.91 is the value of the account after 16 years.