Question

A deposit of $10,000 is made in a trust fund that pays 3.8% interest, compounbed quarterly. It is specified that the balance will be given to Abudu Charity after the money has earned interest for 40years. How much will the charity receive?

Answer 1

9514 1404 393

Answer:

$45,395.39

Explanation:

The formula for an amount earning compound interest is ...

A = P(1 +r/n)^(nt)

where principal P is invested at annual rate r compounded n times per year for t years.

Using the given numbers, we have ...

A = $10,000(1 +0.038/4)^(4·40) ≈ $45,395.39

The charity will receive $45,395.39.