Green River Lodge invests $80,000 in a trust account that pays 4% interest compounded quarterly.
a) What will be the value of the investment in 5 years?
b) How much interest will be earned in the 5 years?
Round your answer to the nearest cent.

Question

Green River Lodge invests $80,000 in a trust account that pays 4% interest compounded quarterly. 
a) What will be the value of the investment in 5 years?
b) How much interest will be earned in the 5 years?
Round your answer to the nearest cent.

Quizplus · Accepted Answer

a) Using the formula for compound interest:
A = P(1 + r/n)^(nt)
where
A = final amount
P = principal amount (initial investment)
r = annual nominal interest rate (as a decimal)
n = number of times the interest is compounded per year
t = time (in years)
We can plug in the values given:
A = $80,000(1 + 0.04/4)^(4*5)
A = $97,615.20
b) To find the amount of interest earned, we subtract the initial investment from the final amount:
Interest = $97,615.20 - $80,000
Interest = $17,615.20
Therefore, the best choice is D as it matches the calculated values.

Green River Lodge Invests $80,000 in a Trust Account That