Question

You plan to invest $2,500 in a money market account which will pay an annual stated interest rate of 8.75 percent, but which compounds interest on a weekly basis. If you leave this money on deposit for one year (52 weeks), what will be your ending balance when you close the account? Show work for credit

Answer 1

Answer:

$2,728.40

Explanation:

Given:

Amount invested in a market = $2,500

Annual interest rate = 8.75%

also, The interest is compounded weekly

and there are 52 weeks in an year

Therefore, the interest rate when compounded weekly = $\frac{\textup{8.75}}{\textup{52}}$

or

Interest rate, r = 0.168% = 0.00168

Thus,

The ending balance = Principle × ( 1 + r )ⁿ

here, n is the duration i.e 52 weeks

therefore,

The ending balance = $2,500 × ( 1 + 0.168 )⁵²

or

The ending balance = $2,728.40