A mother puts $10,000 into a special bank account on the date of birth of her first born. The account earns interest at a rate of 4%, and compounds 4 times per year. When the child turns 18, he receives the lump sum. How much will the child receive?

Question

Mathematics

Kiera Warren

28 May, 07:02

A mother puts $10,000 into a special bank account on the date of birth of her first born. The account earns interest at a rate of 4%, and compounds 4 times per year. When the child turns 18, he receives the lump sum. How much will the child receive?

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Answers (1)

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Fernando Cruz · Answer 1

The equation to calculate compound percentage rate is:

A (t) = P (1 + (r/n)) ^ (nt)

In this case t is 18 years, we put rate (r), number of compounds per day.

A (18) = 10,000 (1 + (0.04/4)) ^ (4*18) = 10,000 (1.01) ^72 = $20,470.99

Child will receive $20,470.99 on it's 18 birthday.