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

Answer:

$5,805.92

Step-by-step explanation:

Lets use the compound interest formula provided to solve this:

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

P = initial balance

r = interest rate (decimal)

n = number of times compounded annually

t = time

First, change 3% into a decimal:

3% -> $\frac{3}{100}$ -> 0.03

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

$A=5,000(1+\frac{0.03}{4})^{4(5)}$

$A=5,805.92$

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