Question

Anya's grandparents decide they want to invest at the bank. They have $35,000
they are willing to invest for 6 years. If they get a 4% interest rate and compound
quarterly, how much can they expect to have in their account at the end of their
investment time.
Round to the nearest cent (if necessary). Show all work for full credit.

Answer 1

Anya's parents will have $44,440.71 after 6 years if they invested in a bank.

The interest rate given is an annual rate yet will be compounded quarterly. You therefore need to convert the interest rate to a quarterly rate.

= 4% / 4 quarters

= 1% per quarter

Number of periods:

= Number of years x Number of quarters in year

= 6 x 4

= 24 quarters

The amount they will have in their account is:

= Amount x ( 1 + rate) ^ number of periods

= 35,000 x ( 1 + 1%)²⁴

= $44,440.71

In conclusion, they will have $44,440.71 if they invested their money in a bank for 6 years.

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