Question

On February 27 you win a raffle and receive the grand prize of $4000. You decide to invest it into a money market account that is compounded quarterly at a rate of 4.5%. What is the approximate value of the investment in one year?

Answer 1

The approximate value of the investment in one year is 4183.

Explanation:

The formula for finding the compound interest for one year that compounded quarterly is :

`A = P(1 + (r)/(400) )^(4t)`

Here,

P - Principal = 4000

r - 4.5%

t - 1

Therefore,

`A = 4000(1 + (4.5)/(400) )^(4)`

`= 4000(1.01125)^(4)`

`= 4000(1.04577)`

= 4183.08

Hence, the approximate value of the investment in one year is 4183.