On Melissa's 6th birthday, she gets a $2000 CD that earns 7% interest compounded quarterly. If the CD matures on her 13th birthd

Question

2 years ago

11

ay, how much money will be available?

1 answer:

Alexandra [31] · Answer 1 · 2022-12-23T03:00:06+03:00

Answer:

$A\simeq3250.83$

Step-by-step explanation:

The amount formula in compound interest is:

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

where:

P = principal amount

r = annual interest

n = number of compounding periods

t = number of years

We already know that:

P = $2000

$r = 7\% = \frac{7\%}{100\%}=0.07$

t = 7 (number of years from 6th to 13th bday)

n = 4 (quarterly in a year)

Then,

$A=2000(1+\frac{0.07}{4} )^{(4)(7)}\\\\A=2000(1+\frac{0.07}{4} )^{28}\\\\A=3250.825792\\\\A\simeq3250.83$