Question

2. The amount of an ordinary $9000.00 annuity for 3 years at 12 percent compounded quarterly is _______? Show work.

Answer 1

Answer:

The amount after three years is $12831.8

Step-by-step explanation:

* Lets revise the compound interest

- The formula for compound interest is  A = P (1 + r/n)^(nt)

 Where:

# A = the value of the investment with interest

# P = the initial investment amount  

# r = the annual interest rate (decimal)

# n = the number of times that interest is compounded per unit t

# t = the time the money is invested

* Now lets solve the problem

∵ The initial amount is $9000

∴ P = $9000

∵ The rate is 12%

∴ r = 12/100 = 0.12

∵ The interest is compound quarterly

∴ n = 4

∵ The money invested for 3 years

∴ t = 3

∵ A = P (1 + r/n)^(nt)

∴ A = 9000(1 + 0.12/4)^(4×3)

∴ A = 9000(1 + 0.03)^12

∴ A = 9000(1.03)^12 = $12831.8