Problem

A bank features a savings account that has an annual percentage rate of $r=2.1 \%$ with interest compounded quarterly: Juan deposits $\$ 10,500$ into the account. The account balance can be modeled by the compound interest formula $A(t)=A_{0}\left(1+\frac{r}{n}\right)^{n t}$, where $A$ is the future value, $A_{0}$ is the original deposit, $r$ is the annual percentage rate, $n$ is the number of times each year that the interest is compounded, and $t$ is the length of time the money is invested in years. (A) What are values for $A_{0}, r$, and $n$ ? \[ A_{0}=\square, r=\square=\square \] (B) How much money will Juan have in the account in 7 years? Answer $=\$$ Round answer to the nearest penny.

Solution

Step 1 :Given values are: initial deposit \(A_{0} = \$10500\), annual interest rate \(r = 2.1\% = 0.021\), number of times interest is compounded per year \(n = 4\), and number of years \(t = 7\).

Step 2 :The account balance can be modeled by the compound interest formula \(A(t)=A_{0}\left(1+\frac{r}{n}\right)^{n t}\).

Step 3 :Substitute the given values into the formula: \(A = 10500 \times \left(1+\frac{0.021}{4}\right)^{4 \times 7}\).

Step 4 :Calculate the future value to find out how much money Juan will have in the account in 7 years.

Step 5 :The future value \(A\) is approximately \$12158.04.

Step 6 :For part (A), the values for \(A_{0}, r\), and \(n\) are: \(A_{0}=\boxed{10500}, r=\boxed{0.021}, n=\boxed{4}\).

Step 7 :For part (B), the amount of money Juan will have in the account in 7 years is: \(\boxed{\$12158.04}\).

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Source: https://solvelyapp.com/problems/Vt6ORrVlZZ/

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