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mixas84 [53]
3 years ago
8

Lorena is investing a $5000 inheritance from her aunt in a certificate of deposit that matures in 4 years. The interest rate is

6.25% compounded quarterly. What is the balance of the account after 4 years?
$5,078.13
$5,319.90
$5,321.82
$6,407.73
Mathematics
1 answer:
Elina [12.6K]3 years ago
6 0

Answer:

$6407.73

Step-by-step explanation:

Use the compound amount formula:  A = P(1 + r/n)^(n*t), where

P is the original amount (the principal), r is the interest rate as a decimal fraction, n is the number of times the interest is compounded per year, and t is the number of years.

In this case, P = $5000, r = 0.0625, n = 4 and t = 4.  Thus,

A = $5000(1 + 0.0625/4)^(4*4), or

A = $5000(1.015625)^16 = $5000(1.2815) = $6407.73 (to the nearest cent)

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