SOLUTION: Use the compound interest formula A=P(1+r/n)^nt to answer the following questions. In the formula, A is the amount of money in the savings account, P is the principle, r is the int

Question 59748: Use the compound interest formula A=P(1+r/n)^nt to answer the following questions. In the formula, A is the amount of money in the savings account, P is the principle, r is the interest rate, t is the time that the money is in the account, and n is the number of times the money is compounded per year. Write each answer to the following questions in a complete sentence.
a. What will be the amount in the account if $800 is invested at 2.4% compounded monthly for 5 years?
b. What amount should a person place in an account if she wishes to have $1500 in 4 years if the money is compounded quarterly at an interest rate of 3.5%?
Answer by tutorcecilia(2152) (Show Source): You can put this solution on YOUR website!

A=P(1+r/n)^nt [Use the compound interest formula]
A=The amount of money in the savings account
P=The principle
r=The interest rate converted to a decimal
t=The time that the money is in the account
n=The number of times the money is compounded per year
.
Write each answer to the following questions in a complete sentence.
a. If the principle amount is $800 at 2.4% interest compounded monthly for 5 years the total amount will be $901.89.
A = 800 [ 1 + ((.024)/(12)) ]^((12)(5))
A =901.89
.
b. If a person wishes to have $1500 in 4 years and it is compounded quarterly at an interest rate of 3.5%, she must invest $1304.83.
A=P(1+(r/n))^(nt) [Solve for P]
P=(1/[1+(r/n))^(nt)] [Plug-in the values]
P = (1500) / {[ 1 + ((.035)/(4)) ]^((4)(4))}
P=1304.8316
.

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