Question

Arianna invests $5600 in a new savings account which earns 5.4% annual interest, compounded quarterly. What will be the value of her investment after 8 years? Round to the nearest cent.

Answer 1

The value of her investment after 8 years is  $8,293.81.

What do interest rates mean?

An interest rate tells you how high the cost of borrowing is, or high the rewards are for saving.

Given:

P= $5600

r= 5.4%

t= 8 years

Then solve the equation for A

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

A = 5,400.00$(1 + 0.054/4)^{4/8}$

A = 5,400.00$(1 + 0.0135)^{32}$

A = $8,293.81

Hence, the value will be $8,293.81.

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