Carl deposited $5,142 into a savings account 20 years ago

Finance Jan 21, 2021

Carl deposited $5,142 into a savings account 20 years ago. The account has an interest rate of 3.8% and the balance is currently $10,994.58. How often does the interest compound?

1) daily

2) monthly

3) quarterly

4) annually

Expert Solution

The correct option is 1st "daily".

Amount = Principal*(1+Rate)^Time

= $5,142*(1+3.8%/365)^(20 years*365)

= $5,142*2.138

Amount = $10,994.58

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