The formula to calculate the final amount with compound interest is:
A = P(1 + r/n)^(nt)
Where:
A = the final amount
P = the principal amount (initial investment)
r = annual interest rate (as a decimal)
n = number of times that interest is compounded per year
t = number of years
In this case, Anne invests $7,000 at an annual interest rate of 3.3%, compounded quarterly, for 25 years. Plugging in the values into the formula:
A = 7000*(1 + 0.033/4)^(4*25)
Simplifying the equation:
A = 7000*(1 + 0.00825)^100
Calculating the inside of the parentheses:
1 + 0.00825 ≈ 1.00825
A = 7000*(1.00825)^100
Calculating the exponent:
(1.00825)^100 ≈ 1.348
A ≈ 7000*1.348
A ≈ 9416
Rounding to the nearest cent:
A ≈ $9416.00
Anne's final amount after 25 years of investment is approximately $9416.00.
Anne invests $7,000 into a retirement account with a compound interest rate of 3.3% compounded quarterly. What is Anne’s final amount after 25 years of investment? Round the answer to the nearest cent. What is the answer?
1 answer