Lucas wins $60000 (after taxes) in the lottery and decides to invest half of it in a 5-year CD that pays 4.63% interest compounded quarterly (4 times/year). He invests the other half in a money market fund that unfortunately turns out to average only 3.72% interest compounded annually over the 5-year period. How much money will he have altogether in the two accounts at the end of the 5-year period?

Question

Lucas wins $60000 (after taxes) in the lottery and decides to invest half of it in a 5-year CD that pays 4.63% interest compounded quarterly (4 times/year).  He invests the other half in a money market fund that unfortunately turns out to average only 3.72% interest compounded annually over the 5-year period.  How much money will he have altogether in the two accounts at the end of the 5-year period?

anonymous · Answer

Compound interest formula

P = principal amount (the initial amount you borrow or deposit)
r  = annual rate of interest (as a decimal)
t  = number of years the amount is deposited or borrowed for.
A = amount of money accumulated after n years, including interest.
n  =  number of times the interest is compounded per year 

A=P(1+r/n)^nt