Question

If $6000 is invested in a certificate of deposit for 6 years at an annual rate of 4.5% how much money will be in the account if the interest rate is compounded weekly? Round to the nearest penny

Answer 1

The compounding interest formula is :

$A=P(1+\frac{r}{n})^{nt}$

where A is the future amount

P is the principal or initial amount

r is the interest rate

n is the number of compounding

t is the time in years

From the given problem,

P = $6,000

r = 4.5% or 0.045

n = 52 (Compounded weekly)

there are 52 weeks in a year.

t = 6 years

Using the formula above, the future amount will be :

$\begin{gathered} A=6000(1+\frac{0.045}{52})^{52(6)} \\ A=6000(1+\frac{0.045}{52})^{312} \\ A=7858.87 \end{gathered}$

The answer is $7858.87