Question

After 4 years, what is the total amount of an investment of $1500 in an account paying 2.5% interest, compounded quarterly?

a. $1827.60
b. $1576.66
c. $1657.24
d. $2226.76

Answer 1

c. $1657.24

Step-by-step explanation:

Since, the amount formula,

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

Where,

P = principal,

r = annual rate,

n = number of compounding periods,

t = number of years

Here, P=$1500, r = 2.5% = 0.025, t = 4 years, n = 4 ( number of quarters in a year )

Hence, the amount after 4 years,

`A=1500(1+(0.025)/(4))^(16)`

`\approx 1657.24` ( Using calculator )

i.e. Option 'c' is correct