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QA young man is the beneficiary of a trust fund established for him 16 yr ago at his birth

A young man is the beneficiary of a trust fund established for him 16 yr ago at his birth. If the original amount placed in trust was $40,000, how much will he receive if the money has earned interest at the rate of 9%/year compounded annually? Compounded quarterly? Compounded monthly? (Round your answers to the nearest cent.)






compounded annually ?


compounded quarterly ?


compounded monthly ?

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#1wHiTeNiGgEr Answered at 2013-03-03 12:16:43
You can use the compound interest formula to get your answers: {{{A = P(1+i/q)^nq}}} A = The present amount (your answer). P = the principal amount invested (P = $40,000). i = the rate of interest, expressed as a decimal (i = 0.09). q = The number of compounding periods per year (q = 1 for annually, 4 for quarterly, and 12 for monthly). n = number of years (n = 16). Compounded annually: {{{A = P(1+i/q)^nq}}} Substitute P = 40000, i = 0.09, q = 1 (once per year), and n = 16: {{{A = 40000(1+0.09)^16}}} Use your calculator. {{{A = 158812.24}}} A = $158,812.24 Compounded quarterly: {{{A = P(1+i/q)^nq}}} Substitute P = 40000, i = 0.09, q = 4 (4 times per year), and n = 16. {{{A = 40000(1+0.09/4)^(4*16)}}} Use your calculator. {{{A = 166154.56}}} A = $166,154.56 You should now be able to do the last one yourself using the same formula and the same numbers except that q = 12 (for 12 times per year).
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