Bradley Snapp has deposited $7,000 in a guaranteed investment account with a promised rate of 6% compounded annually.He plans to leave it there for 4 full years when he will make a down payment on a car after graduation.How much of a down payment will he be able to make?

Question

Quizplus · Accepted Answer

We can use the compound interest formula, A=P(1+r/n)^(n*t), where A is the final amount, P is the principal, r is the annual interest rate, n is the number of times compounded per year, and t is the time in years. Plugging in the values, we get:

A = 7,000(1+0.06/1)^(1*4)
A = 7,000(1.06)^4
A = 8,837.34

Therefore, Bradley will be able to make a down payment of $8,837.34.

Bradley Snapp Has Deposited $7,000 in a Guaranteed Investment Account