Nathaniel B. answered • 06/12/18
Tutor
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Economics professor with diverse teaching experience
In order to answer this one, you'll need a formula to help you out. This is the compound interest formula and looks like this:
A=P(1+r/n)nt
A is the ending amount
P is the starting amount (or principal amount)
A=P(1+r/n)nt
A is the ending amount
P is the starting amount (or principal amount)
r is the interest rate
t is the number of time periods (in years)
n is how many times the amount compounds in a year
For this problem, we can assume n=1, since the problem does not say anything about compounding multiple times in a year, so then we just plug everything else in where it belongs as I explained. Remember the interest rate needs to be converted to its decimal form!
A=25,000(1+0.035)^46
A=25,000*(1.035)^46
A=121,673.5275
Since we are dealing with money, we can round to two decimal places, therefore:
A=121,673.53
t is the number of time periods (in years)
n is how many times the amount compounds in a year
For this problem, we can assume n=1, since the problem does not say anything about compounding multiple times in a year, so then we just plug everything else in where it belongs as I explained. Remember the interest rate needs to be converted to its decimal form!
A=25,000(1+0.035)^46
A=25,000*(1.035)^46
A=121,673.5275
Since we are dealing with money, we can round to two decimal places, therefore:
A=121,673.53
