write clear Compound Interest If Don Gecewicz invests 5000 a

write clear

Compound Interest If Don Gecewicz invests $5000 at 6% interest compounded quarterly, find the amount after 4 years.

Solution

The formula for compound interest, where compounding is done at quarterely intervals, is F = P(1 +r/4)^4t where P is the principal or initial investment, r is the rate of interest in decimals, t is the number of years for which the amount is invested and F is the maturity value. Here, P = $ 5000, r = 6 % = 6/100 = 0.06 ( so that r/4 = 0.0015) and t = 4.Therefore, the maturity value of the amount of $ 5000 invested by Don Gecewicz is 5000( 1 + 0.0015)^4*4 = 5000(1.0015)¹⁶ = 5000* 1.024271899 = $ 5121. 36 ( on rounding off to the nearest cent).