Question

Suppose you invest $3,500 in a savings account that earns 7% Interest, compounded

Answer 1

Given:

Principal = $3,500

Rate of interest = 7% compounded quarterly (4 times in an year)

Time = 6 years

To find:

The amount.

Solution:

The formula for the amount is

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

Where, P is principal, r is rate of interest, n is number of times interest compounded in an year and t is number of years.

Putting P=3500, r=0.07, n=4 and t=6 in the above formula, we get

$A=3500\left(1+\dfrac{0.07}{4}\right)^{(4)(6)}$

$A=3500\left(1+0.0175\right)^{24}$

$A=3500\left(1.0175\right)^{24}$

$A=5307.54975$

$A\approx 5307.55$

Therefore, the amount after 6 years is $5307.55.