Question

5. Christopher is going to invest in an account paying an interest rate of 4.1% compounded quarterly. How much would Christopher need to invest, to the nearest hundred dollars, for the value of the account to reach $1,140 in 7 years?

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Answer 1

$900

Explanation:

Formula for quarterly compounded interest is A = P (1 + r/4)^4t

Where P is initial amount, t is time in years, r is rate in decimals.

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

1140 = P (1 + r/4)^4t

1140 = P (1 + 0.041/4)^4X7

1140 = P (1.01025)^28

P = 1140 / [(1.01025)^28]

= $856.83

= $900 to nearest hundred dollars