Question 611678: You deposit $3000 in an account that pays 7% interest compounded semiannually. After ten years, the interest rate is increased to 7.25% compounded quarterly. What will be the value of the account after 16 years?
Answer by lwsshak3(11628)   (Show Source):
You can put this solution on YOUR website! You deposit $3000 in an account that pays 7% interest compounded semiannually. After ten years, the interest rate is increased to 7.25% compounded quarterly. What will be the value of the account after 16 years?
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compound interest formula: A=P(1+r)^n, P=initial amt, r=interest rate per period, n=number of periods, A=amt after t periods
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After 10 years of semi annual compounding at 7% interest rate
A=3000(1+.07/2)^10*2
A=3000(1+.035)^20
A=3000(1.035)^20≈5969.37
After 16 years(4 more years of quarterly compounding at 7.25% interest rate)
A=5969.37(1+.0715/4)^4*4
A=5969.37(1+.018125)^16
A=5969.37(1.018125)^16≈7956.94
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Value of the account after 16 years=$7956.94
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