Eric deposted $32,000 in a savings account to save for his children's college education. The bank pays 8% tax-deferred interest per year compounded quarterly. How much will his account be worth at the end of 18 years?
32,000(1.02)^72=$113,156.50
Is this correct?
I got 133,156.50 , you probably hit a wrong key when you typed it.
To calculate the future value of Eric's savings account after 18 years, we need to use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the investment/loan, including interest
P = the principal investment amount, which is $32,000 in this case
r = the annual interest rate in decimal form, which is 8% or 0.08
n = the number of times that interest is compounded per year, which is quarterly or 4 times
t = the number of years the money is invested for, which is 18 years
Plugging these values into the formula, we get:
A = 32,000(1 + 0.08/4)^(4*18)
= 32,000(1.02)^72
= $113,094.63 (rounded to the nearest cent)
So, the correct answer is $113,094.63, not $113,156.50.