SOLUTION: You deposit $6,800 in a money-market account that pays an annual interest rate of 5.7%. The interest is compounded quarterly. How much money will you have after 3 years?

Algebra ->  Customizable Word Problem Solvers  -> Finance -> SOLUTION: You deposit $6,800 in a money-market account that pays an annual interest rate of 5.7%. The interest is compounded quarterly. How much money will you have after 3 years?       Log On

Ad: Over 600 Algebra Word Problems at edhelper.com


    

Question 77404: You deposit $6,800 in a money-market account that pays an annual interest rate of 5.7%. The interest is compounded quarterly. How much money will you have after 3 years?
Answer by Edwin McCravy(20056) About Me  (Show Source):
You can put this solution on YOUR website!

You deposit $6,800 in a money-market account that pays 
an annual interest rate of 5.7%. The interest is 
compounded quarterly. How much money will you have after 
3 years?

P=6800, r=.057,t+=+3, n=4

The reason n=4 is because "quarterly" means "4 times a year". 
Plug in the compound interest formula:

A+=+P%281%2Br%2Fn%29%5E%28nt%29

A+=+6800%281%2B.057%2F4%29%5E%284%2A3%29

A+=+6800%281%2B.01425%29%5E12  

A+=+6800%281.01425%29%5E12

A+=+8058.405349

or A = $8038.40 rounded down to the nearest cent.
(Banks NEVER round UP to the next penny, even though 
the rule we are taught is to round UP to the next 
penny when the third decimal place is 5 or more.)

Edwin