Problema Solution
$3,000 is deposited in a savings account. Estimate the value in the account
after 20 years in each of the following cases (please round your final answer to two decimal
places).
a. the annual interest rate is 4.95% compounded quarterly?
b. the annual interest rate is 2.6% compounded daily?
Answer provided by our tutors
P = $3,000
t = 20 years
A = the future (maturity) value
a.
r = 4.95% = 0.0495
m = 4 compounding periods per year
n = m*t = 20*4 = 80 compounding periods
i = r/m = 0.0495/4 = 0.012375% per quarter
A = P(1 + i)^n
A = 3000(1 + 0.012375)^80
A = $8024.80
b.
r = 2.6% = 0.026
m = 360 compounding periods per year
n = m*t = 20*360 = 7200
i = r/m = 0.026/360 = 0.013/180
A = P(1 + i)^n
A = 3000(1 + 0.013/180)^7200
A = $5045.99