Question

Jameel Alharbi deposited $1,500 in a savings account that earns 5% compounded quarterly. He made no other deposits or withdrawals. What is the amount in the account at the end of the second quarter?

$2562.87

$1537.73

$2050.31

$1025.00

Answer 1

The amount in the account at the end of the 2nd quarter is $1537.73 ⇒ 2nd answer

Explanation:

* Lets revise the compound interest

- Compound interest can be calculated using the formula

A = P (1 + r/n)^(nt)

Where:

• A = the future value of the investment, including interest

• P = the principal investment amount (the initial amount)

• r = the annual interest rate (decimal)

• n = the number of times that interest is compounded per unit t

• t = the time the money is invested for

* Now lets solve the problem

# P = $1500

# r = 5/100 = 0.05

# n = 4 ⇒ quarterly compound

# t = 1/2 ⇒ two quarters means 1/2 year

∴ A = 1500(1 + 0.05/4)^(4 × 1/2) = $1537.73

* The amount in the account at the end of the 2nd quarter is $1537.73