Pedro deposited $7,350 into a savings account 21 years ago. The account has an interest rate of 4.5% and the balance is currently $18,810.67. How often does the interest compound?

Question

Mathematics

Adonis Harding

5 November, 20:07

Pedro deposited $7,350 into a savings account 21 years ago. The account has an interest rate of 4.5% and the balance is currently $18,810.67. How often does the interest compound?

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Answers (1)

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Emery Sampson · Answer 1

The interest is compounded quarterly because the formula is

A=p (1+r/k) ^kt

A it's 18810.67 but I will assume it's unknown?

P present value 7350

R interest rate 0.045

K compounded quarterly 4

Now solve the formula as the interest is compoundedquarterly

A=7,350 * (1+0.045:4) ^ (4*21)

A=18,810.67

So the answer is quarterly