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Bob invests $10 000 into a college fund for his brother Bill. If the bank gives hm 3.5%...

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user393481 | eNotes Newbie

Posted June 15, 2013 at 9:46 PM via web

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Bob invests $10 000 into a college fund for his brother Bill. If the bank gives hm 3.5% / annum, compounded quarterly, over 10 years, how much money will there be for Bill after 10 years?

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llltkl | College Teacher | Valedictorian

Posted June 16, 2013 at 1:19 AM (Answer #1)

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The sum amount (Principal +interest) obtainable after t terms in a compound interest scheme is given by

`S = P (1+r/100)^t` , where P is the principal and r its rate of interest.

Bob invests $10000 for 10 years at 3.5%/annum interest , compoundable quarterly,

So, r = 3.5/4

and t = 4*10 = 40

Putting the values

`S = 10000 (1+3.5/(4*100))^40`

`= 10000(1+3.5/(400))^40`

`= 10000((400+3.5)/(400))^40`

`= 10000((403.5)/(400))^40`

`=14169.09`

Therefore, after 10 years there will be $ 14169 for Bill in the college fund.

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