Intermediate Algebra

Question

Suppose $20,000 is invested at 8% interest compounded quarterly. What is the value of the investment after 30 years?

Answer 1

For compound interest, you will want to use this equation:

Where P is the original amount, r is the interest rate, n in the number of times compounded per period, and t is time.

If you want to know about 30 years from now, you should assign the units of t as years. Therefore, n=4 because you are compounding quarterly and there are 4 quarters in each year.

From there, you will want to plug all the variables into the equation to get $215,303.26 as the value of the investment after 30 years.

Answer 2

The formula for compound interest is

V = P(1 + r /n)^nt

where P is the principal, r is the interest rate, n is the number of times compounded in a year (4), and t is time in years. Using the given values, the value of the investment after 30 years is

V = 20000(1 + 0.02)⁴⁽³⁰⁾ = $215,303.26