Question

Suppose $2000 is deposited in an account paying 2.5% interest compounded quarterly. What will the account balance be after 12 yr?

Please explain for me because I am having trouble on this unit.

Answer 1

Notice that the percentage is divided into 4 parts ( because it is being compounded quarterly). Also, notice the 4*12. This is because there are 48 quarters in 12 years. Therefore, the answer $24605.65 is the compounded amount after 12 years (or 48 quarters).