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. $1657.24
C. $1576.66
D. $2226.67

Answer 1

Option (b) is correct.

The amount after 4 years will be $1657.24

Explanation:

Given : an investment of 1500 in an account paying 2.5% interest.

We have to find the amount after 4 years , compounded quarterly.

Using formula for Compound interest

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

Where,

A = Amount

P = Principal amount

r = rate of interest

n = time period

For the given data,

P = 1500

r= 2.5 %

When Compound interest is calculated quarterly

Time becomes 4 time the original time

and rate become one forth of the original rate.

Then r =
`(0.025)/(4)`

and n = 16

Substitute, we have,

`A=1500(1+(0.025)/(4))^(\left(4\cdot4\right))`

Simplify, we have,

A = 1657.24

Thus, The amount after 4 years will be $1657.24