Question

Suppose you invest $3500 at annual interest rate of 2.5 % How much money do you have in the account after five years?

Answer 1

Answer:

Please check the explanation.

Step-by-step explanation:

To find the amount we use the formula:

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

Here:

A = total amount

P = principal or amount of money deposited,

r = annual interest rate

n = number of times compounded per year

t = time in years

Given

P=$3500

r=2.5%

n=12

t = 5 years

Calculating compounded monthly

After plugging in the values

$A=3500\left(1+\frac{2.5\%\:}{12}\right)^{12\cdot \:5}$

$A=3500\left(1+\frac{0.025}{12}\right)^{12\cdot \:5}$

$A=3500\cdot \frac{12.025^{60}}{12^{60}}$

$A = 3959.93$

Thus, If you deposit $3500 into an account paying 2.5% annual interest compounded monthly, you will have $3959.93 after five years.

Calculating compounded weekly

n = 52

$A=3500\left(1+\frac{2.5\%\:}{52}\right)^{52\cdot \:5}$

$A=3500\left(1+\frac{0.025}{52}\right)^{52\cdot \:5}$

A = 3,965.90

Thus, If you deposit $2000 into an account paying 4.5% annual interest compounded weekly, you will have $3,965.90  after five years.