Question

You invest $15,000 in a savings account with an annual interest rate of 2.5% in which the interest is compounded quarterly. How much money should you expect to have in the account after 5 years? Show your work to receive full credit!

Answer 1

Answer:

The Amount which should be expected in the account after 5 years is     $ 16,990.5

Step-by-step explanation:

Given as :

The investment amount in saving account = $ 15,000

The annual rate of interest = 2.5 % compounded quarterly

The time period = 5 years

Let the amount in account after 5 years = $ A

From compounded method

Amount = Principal × $( 1 +\dfrac{\textrm Rate}{100\times 4})^{4\times \textrm Time}$

or, Amount = $ 15,000 × $( 1 +\dfrac{\textrm 2.5}{100\times 4})^{4\times \textrm 5}$

or, A =  $ 15,000 × $(1.00625)^{20}$

Or, A =   $ 15,000 × 1.1327

∴ A = $ 16,990.5

So, Amount = A = $ 16,990.5

Hence The Amount which should be expected in the account after 5 years is $ 16,990.5  Answer