Quantitative Reasoning

Question

If $34,500 is invested at 6.9% for 30 years, find the future value if the interest is compounded:

A) Annually

B) Daily

Answer 1

34,500(1.069)^30

= amount's future value if compounded annually

34,500(1 + .069/12)^360

= amount's future value if compounded monthly

34,500(1 + .069/365)^365(30)

general formula

is

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

where P = initial amount = $34,500

A = ending amount

r = annual interest rate = 6.9% = .069

t = number of years = 30

n = number of compounding periods per year = 1 for annual compounding, or 12 for monthly compounding, or 365 or 365.25 for daily compounding