Question

Gabe deposits $7,000 in a certificate of deposit. The annual interest rate is 4%, and the interest will be compounded

quarterly. How much will the certificate be worth in 5 years? Round your answer to two decimal places.

The certificate will be $8541.33 of worth in 5 years.

Explanation:

A = P (1 + r / n) ⁿˣ

P = Principal amount = $7000

r = Annual interest rate = 4%

n = Number of compounds per year = 4

x = time in years = 5

A = Amount after time 'x' = ?

A = 7000 (1 + 0.04 / 4) ⁴ˣ⁵

A = 7000 (1 + 0.01) ²⁰

A = 7000 (1.01) ²⁰

A = 7000 (1.2202)

A = 8541.33