Problema Solution
Suppose that you invest $1000 in a savings account with r% interest, compounded quarterly. After 5 years the account has $1485.95. How much mone will you have when you retire 45 years from now?
Answer provided by our tutors
P = $1,000.00 the principal
r% or r/100 as a decimal, annual rate
m = 4 compounding period per year (compounded quarterly)
i = r/400 interest rate per period
t = 5 years number of years
n = t*m = 5*4 = 20 total number of compounding periods
A = $1485.95 the future value
A = P(1 + i)^n
1000(1 + r/400)^20 = 1485.95
(1 + r/400)^20 = 1485.95/1000
We need to find A for t = 45 years, n = 4*45 = 180 that is
A = 1000(1 + r/400)^180
A = 1000((1 + r/400)^20)^9
A = 1000 (1485.95/1000)^9
A = $35,321.39
click here to see the step by step calculation:
in 45 years you will have $35,321.39.