Question 712233: Irene McGuinness is planning a vacation in Europe in 4 years, after graduation. She
estimates that she will need $3,500 for the trip.
a. If her bank is offering 4-year certificates of deposit with 8% interest compounded
quarterly, how much must Irene invest now to have the money for the trip?
b. How much compound interest will be earned on the investment?
Answer by stanbon(75887)   (Show Source):
You can put this solution on YOUR website! Irene McGuinness is planning a vacation in Europe in 4 years, after graduation. She estimates that she will need $3,500 for the trip.
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a. If her bank is offering 4-year certificates of deposit with 8% interest compounded quarterly, how much must Irene invest now to have the money for the trip?
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A(t) = P(1+(r/n))^(nt)
3500 = P(1+(0.08/4))^(4*4)
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3500 = P(1.3728)
P = $2549.56
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b. How much compound interest will be earned on the investment?
Ans: 3500-2549.56 = $950.44
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Cheers,
Stan H.
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