Problema Solution
Alex invests $25000 iun a certificate of deposit (CD) earning 4.8% interest compounded quarterly. How much is this (CD) worth in 5 years and in 10 years? Find the exponential function. then evaluate.
Answer provided by our tutors
A = Total amount of money after t years
P = Principal amount
r = annual interest rate (decimal form)
n = number of times interest is compounded per year
t = number of years
A = P (1 + r/n)^nt
1. A = $25,000 (1 + 0.048/4)^4*5
A = 25,000 (1 + 0.012)^20
A = 25,000 (1.012)^20
A = 25,000 (1.27)^20 - don't round; keep saved in calculator and then multiply the 25,000
A = $31,735.86
2. A = $25,000 (1 + 0.048/4)^4*10
A = 25,000 (1 + 0.012)^40
A = 25,000 (1.012)^40
A = 25,000 (1.27)^40 - don't round; keep saved in calculator and then multiply the 25,000
A = $40,286.59