Question

Anna also wants to travel after graduation but she isn’t working while in school so she won’t be able to put money aside regularly. However, her grandmother gave her the generous gift of $2500 for her birthday and suggested she invest it in a GIC because it’s low risk. She shopped around and found a 4 year GIC investment that earns 2.8% interest annually. How much will Anna have at the end of her four year investment?

Answer 1

Answer:

She will have $2792 at the end of her four year investment

Step-by-step explanation:

The compound interest formula is given by:

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

Where A(t) is the amount of money after t years, P is the principal(the initial sum of money), r is the interest rate(as a decimal value), n is the number of times that interest is compounded per year and t is the time in years for which the money is invested or borrowed.

Gift of $2500:

This means that $P = 2500$

She shopped around and found a 4 year GIC investment that earns 2.8% interest annually.

This means that $t = 4, r = 0.028, n = 1$.

How much will Anna have at the end of her four year investment?

This is A(4). So

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

$A(4) = 2500(1 + 0.028)^{4} = 2792$

She will have $2792 at the end of her four year investment