Question

8. A savings account earns 4% annual interest compounded quarterly. How much interest would $500 earn if it was invested for one year?* OA. $20.00 OB. $20.30 OC. $54.20 OD. $84.93 OE. $200.00

Answer 1

$20.30

Explanation:

Given : A savings account earns 4% annual interest compounded quarterly.

To Find : How much interest would $500 earn if it was invested for one year?

Solution:

Rate of interest = r = 4% = 0.04

Principal = $500

T = 1 year

n = No. of compounds per year = 4

Formula :
`A=P(1+(r)/(nt))^(nt)`

Substitute the values

`A=500(1+(0.04)/(4))^(4)`

`A=520.30`

Interest = Amount - principal = $520.30-$500=$20.30

Hence $500 would earn $20.30 if it was invested for one year.

So, Option B is true .