You invest 500 in an account that has an annual interest rate of 8%, compounded weekly for 12 years. What is the equivalent interest rate and how many times will the money be compounded? How much will you have?

Solution

Y o u in v es t 500 in an a cco u n t t ha t ha s an ann u a l in t eres t r a t e o f 8%, co m p o u n d e d w ee k l y f or 12 ye a rs . Wha t i s t h e e q u i v a l e n t in t eres t r a t e an d h o w man y t im es w i ll t h e m o n ey b e co m p o u n d e d ? Ho w m u c h w i ll yo u ha v e ?

Amount : 1304.89

Solution steps

Translate the problem into an equation:

A = 500 (1 + \frac{0.08}{52})^{52 \cdot 12}

500 (1 + \frac{0.08}{52})^{52 \cdot 12} = 1304.88526 \dots

Round to the nearest hundredth:

1304.89

Amount : 1304.89