Question

Jose opened a Premier account at City National Bank of Iowa with a minimum required deposit of

$1000. This bank advertised a rate of 1/2% on their Premier account with interest compounded quarterly.
After 5 years, what is the amount in the account?

Answer 1

$1,025.299

Step-by-step explanation:

The formula for compound interest is

FV = PV × (1+r)^ n

Where Fv is the future value

Pv is the present value = $1000

r is interest rate = 1/2 % or 0.5% per year

n is five years

interest is compounded quarterly,

Interest per quarter = 0.5% /4 = 0.125% which is 0.00125

n will be 5 years x 4 quarters = 20 periods

Fv= $1000 x (1 +0.00125)^20

Fv =$1000 x(1.00125)^20

Fv= $1000 x 1.025299

Fv = $1,025.299