Question

A newborn child receives a $4,000 gift toward a college education from her grandparents. How much will the $4,000 be worth in 20 years if it is invested at 7.2%compounded quarterly?.It will be worth $(Round to the nearest cent.)<

Answer 1

We can use the formula:

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

The problem gives us all values:

A = $4000

r = 0.072 = 7.2%

n = 4 (compounded quartely)

t = 20 years

Therefore

$\begin{gathered} A=4000\mleft(1+\frac{0.072}{4}\mright)^{4\cdot20} \\ \\ A=16667.9516 \end{gathered}$

Then, rounding to the nearest cent we get

$A=\ 16667.95$