To save for retirement, a couple deposited $4000 in an account that pays 7% interest compounded daily.
a) What will the value of the investment be in 5 years?
b) How much interest will be earned in the 5 years?
Round your answer to the nearest cent.

Question

To save for retirement, a couple deposited $4000 in an account that pays 7% interest compounded daily. 
a) What will the value of the investment be in 5 years?
b) How much interest will be earned in the 5 years?
Round your answer to the nearest cent.

Quizplus · Accepted Answer

We can use the formula A=P(1+r/n)^(nt) where A is the final amount, P is the principal, r is the annual interest rate, n is the number of times the interest is compounded per year, and t is the time in years. Plugging in the values, we get A=4000(1+0.07/365)^(365*5) which simplifies to $5676.08 (rounded to the nearest cent).

To find the interest earned, we can subtract the principal from the final amount: $5676.08 - $4000 = $1676.08 (rounded to the nearest cent). Therefore, the best choice is A.

To Save for Retirement, a Couple Deposited $4000 in an Account