Question

You invest $15,000 in a savings account with an annual interest rate of 2.5% in

which the interest is compounded quarterly. How much money should you expect to
have in the account after 5 years? Show your work please:)

Answer 1

$1699.06

Explanation:

Using the compound interest formula Accrued Amount = P (1 + r/n)^n t

where Accrued amount is to be determined

P = principal; $1500

r = 2.5% = 0.025

n = number of times interest is applied annually = 4 for quarterly

t = number of years = 5

Therefore

Accrued amount = 1500 (1 + (0.025/4))^(5 x 4)

= 1500 x (1 + 0.0625)^20

= 1500 x 1.1327

= 1699.06

Hence at the end of 5 years, there will be $1699.06 in the account