Peter deposited $8,975 into a savings account 21 years ago. The account has an interest rate of 3.8% and the balance is currentl
y $19,909.20. How often does the interest compound?
1 answer:
The formula for the future value of the account is
A = P(1 + r/n)^(nt)
where you have
A = 19909.20
P = 8975
r = 0.038
t = 21
The resulting equation is not one that can be solved by algebraic means, but we can use a graphing calculator to find n. This graph shows us n = 12, so
the interest compounds monthly.
A = P(1 + r/n)^(nt)
where you have
A = 19909.20
P = 8975
r = 0.038
t = 21
The resulting equation is not one that can be solved by algebraic means, but we can use a graphing calculator to find n. This graph shows us n = 12, so
the interest compounds monthly.
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