Elementary Technical Mathematics

Published by Brooks Cole
ISBN 10: 1285199197
ISBN 13: 978-1-28519-919-1

Chapter 1 - Section 1.16 - Application Involving Percent: Business and Personal Finance - Exercises: 6

Answer

Ted would have $\$8,699.69$ at the end of five years.

Work Step by Step

Find the total value (A) using the formula $A=P\left(1+\dfrac{r}{n}\right)^{nt}$ where $P$=principal amount, $r=$annual interest rate, $t$=time in years, and $n$=number of compounding periods in a year The given problem has: $P=\$6,000$ $t=5$ $r=7.5\%$ $n=4$ (since compounded quarterly) Use the formula above to obtain: $A=\$6,000\left(1+\dfrac{7.5\%}{4}\right)^{4(5)} \\A=\$6,000\left(1+\dfrac{0.075}{4}\right)^{20} \\A=\$8,699.688154 \\A\approx \$8,699.69$
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