A grandmother deposited $2,000.00 in an account that pays 7% per year compounded annually when her granddaughter was born. What will the value of the account be when the granddaughter reaches her 14th birthday?
What will the value of the account be when the granddaughter reaches her 14th birthday?
an exact answer has already been given, but you might also remember that an estimate can be undertaken by using the rule of 72. Divide the interest rate, in percent, into 72. The answer is approximately the number of years for the principal to double. so, in 10 years you go from $2000 to $4000. In 4 more years, you can guess another $1000+, so you are around $5000 after 14 years.
Reply:The formula is P(1 + int/100)^n, where P is the principal (2000), int is the interest rate (7%) and n is the number of years (14). So. when she reaches 14, the value is:
$2000(1 + 0.07)^14 = $5157.07
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