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Lorene Buckley wants to invest $3,500 today in a money market fund that pays a quarterly interest at 5 percent. She plans to fund a scholarship with the proceeds at her alma mater, Towson University. How much will Lorene have at the end of seven years? (Round to the nearest dollar.)

Respuesta :

Edufirst

Answer:

  • $4,956

Explanation:

You need to calculate the value at the end of seven years using compound interest.

  • Principal: P = $3,500
  • annual interest, i = 5% = 0.05
  • quarterly interest: r = 5%/4 = 0.05/4 = 0.0125
  • number of periods: n = 7 years × 4 quarters/year = 28

The fomula is:

  • Future value = P (1 + r)ⁿ

Substitute:

  • Future value = $3,500 (1 + 0.0125)²⁸ = $4,955.97 ≈ $4,956

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