Math help needed: How much the investment is worth #9

label Mathematics
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The manager of a money market fund has invested $4.2 million in certificates of deposit that pay interest at the rate of 5.4%/year compounded quarterly over a period of 5 years. How much will the investment be worth at the end of 5 years?
Nov 9th, 2015

Thank you for the opportunity to help you with your question!

The answer is A.) 5,491,921.88

We use the compound interest formula :  A = P*(1 + (r/k))^(kt)

here k = 4  (compounded quarterly)

t = 5 years.

P = $4,200,000

Amount = $4,200,000*(1 + (0.054/4))^(4*5)

= $4,200,000*(1.0135)^20

= $4,200,000* 1.3076004476

= $5,491,921.88

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Nov 9th, 2015

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