Answered

How much would you have in 6 years if you purchased a $1,000 6 year savings certificate that paid 3% compound quarterly?(Round your your answer to the nearest cent.)

Answer :

SOLUTION

To solve this, we will apply the compound interest formula

[tex]A=P(1+\frac{r}{n})^{nt}[/tex]

Where

A = the amount of money realized

P = the principal sum of money = $1,000

r = interest rate = 3%

n = number of times compounded = 4, since it is quaterly

t = time = 6 years.

So, this becomes

[tex]\begin{gathered} A=P(1+\frac{r}{n})^{nt} \\ \\ A=1000(1+\frac{3}{100\times4})^{4\times6} \\ \\ A=1000(1+0.0075)^{24} \\ A=1000(1.0075)^{24} \\ A=1000\times1.1964 \\ A=1196.41\text{ dollars to the nearest cent } \end{gathered}[/tex]

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