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Mark Welsch deposits $8,000 in an account that earns interest at an annual rate of 8%, compounded quarterly. The $8,000 plus earned interest must remain in the account 4 years before it can be withdrawn. How much money will be in the account at the end of 4 years?

User Bribeiro
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2 Answers

6 votes

Final answer:

Mark Welsch will have approximately $11,790.85 in his account at the end of 4 years, after depositing $8,000 with an interest rate of 8% compounded quarterly.

Step-by-step explanation:

To calculate the future value of Mark Welsch's deposit, we need to apply the formula for compound interest. The general formula is A = P(1 + r/n)nt, where:

  • P is the principal amount (the initial amount of money)
  • r is the annual interest rate (in decimal form)
  • n is the number of times the interest is compounded per year
  • t is the time the money is invested for, in years

In this scenario:

  • P = $8,000
  • r = 8% or 0.08 in decimal
  • n = 4 (since the interest is compounded quarterly)
  • t = 4 years

Substituting these values into the compound interest formula:

A = 8000(1 + 0.08/4)4*4

Let's do the math:

  1. Divide the annual interest rate by the number of compounding periods: 0.08/4 = 0.02.
  2. Add 1 to the result of step 1: 1 + 0.02 = 1.02.
  3. Raise the result of step 2 to the power of the total number of compounding periods: 1.0216 (since 4 years times 4 quarters per year equals 16 quarters).
  4. Multiply the principal amount by the result of step 3: $8000 * 1.0216.
  5. The final calculation gives us the future value of the investment.

Upon performing the calculations, we find that A is approximately $11,790.85.

This is the amount of money Mark will have in his account at the end of 4 years, including the principal and the compound interest earned over time.

User Valeriy Gorbatikov
by
5.3k points
4 votes

Answer:

At the end the account will need have at the end of the 4 years $17.664,31

Explanation:

Consider the following formula of real interest compound

8.000 deposits

sum after n years = 8.000 * (1+.08/4)^(n*4)

= 8.000*(1.02)^40 = $17.664,31

User ChristofferH
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4.8k points