Suppose that dollar 2000 is invested at a rate of 56 percent

Suppose that dollar 2000 is invested at a rate of 5.6 percentage, compounded quarterly. Assuming that no withdrawals are made, find the total amount after 7 years. Do not round any intermediate computations, and round your answer to the nearest cent.

Solution

We know that

A = p ( 1 + ( r / n ) )^nt

Where

A = final amount

p = initial amount

r = interest rate ( expressed as decimal )

n = number of compoungs per year

t = time

Given that

p = $2000 , r = 5.6 % = 0.056 , t = 7 years

If interest is compounded quarterly then n = 4

Total amount after 7 years is A =  p ( 1 + ( r / n ) )^nt

A = $2000 ( 1 + ( 0.056 / 4 ))^4x7

A = $2000 ( 1 + 0.014 )²⁸

A = $2000 ( 1.014 )²⁸

A = $2951.84

Therefore,

  Total amount after 7 years = $2951.84