Answer: A - A $20,000 investment that earns 20% interest compounded quarterly would be worth $991,228.82 at the end of a 20-year investment period.
The equation for compound interest is A = P(1 + r/n)^nt, in which A is the total investment, P is the principal investment, r is the interest rate expressed in decimal form, n is the number of times interest is added per year, and t is the number of years for which the principal is invested.
In this example, the principal investment is $20,000, the interest rate is 0.2, interest is calculated four times a year, and the investment time is 20 years. To find the worth of the investment, we solve for A:
A = $20,000(1+(0.2/4))^4x20
A = $20,000(1+0.05)^80
A = $20,000(1.05)^80
A = $20,000(49.56)
A = $991,228.82
