Question

If Maggie invests $16,250 at a rate of 4.9%, compounded monthly, find the value of the investment after 7 years. Include your calculations in your final answer.

Answer 1

22883$

Explanation:

We can use the concept of compound interest. Compound interest is the benefit of an investment at an interest rate over a certain period of time. The formula for compound interest is:

`FV=PV(1+(r)/(n) )^(nt)`

Where:

`FV=Future\hspace{3}value\\PV=Present\hspace{3}Value\hspace{3}or\hspace{3}Initial\hspace{3} deposit\\n=Number\hspace{3} of\hspace{3} times\hspace{3} that\hspace{3} interest\hspace{3} is\hspace{3} compounded\hspace{3} per \hspace{3}unit\hspace{3} t\\r=Interest \hspace{3}rate \\t=Time`

Using the data provided by the problem:

`PV=16250\\r=4.9\%=0.049\\t=7\\n=12(Because\hspace{3}it\hspace{3}is\hspace{3}compounded \hspace{3}monthly)`

Therefore:

`FV=16250*(1+(0.049)/(12) )^(7*12)=22883.00551\approx 22883\`

Hence, the value of the investment after 7 years is 22883$

Answer 2

We can solve the problem using the formula for compound interest equation:
A = P + (1 + r/n) ^nt
Where the given values are below:
P = $16, 250
r = 0.049
n = 12 months
t = 7 mohths
P = $16,250*(1 + 0.049/12)^ (12*7)
P = $22,883