Question

Suppose an amount of $10,000 is deposited into a bank account that pays 4% interest compounded four times a year. If there are no other withdrawals or deposits, which equation models the value of the account after 5 years?

Answer 1

Answer:

$A=10,000(1+\frac{0.04}{4})^{4(5)}$

Step-by-step explanation:

For a problem like this, we would use the compound interest formula:

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

P = initial balance

r = interest rate (decimal)

n = number of times compounded annually

t = time

First, lets change 4% into a decimal:

4% -> $\frac{4}{100}$ -> 0.04

Since the interest is compounded 4 times a year, we will use 4 for n.

The equation is shown below:

$A=10,000(1+\frac{0.04}{4})^{4(5)}$