INFORMATION:
We know that:
- $300 are invested
- 2% compounded quarterly
- period of 3 years
STEP BY STEP EXPLANATION:
Since we have a compounded interest, we must use the Compound interest formula.
The compound interest formula is an equation that lets you estimate how much you will earn with your savings account.
The formula is:
Where,
- FV - the future value of the investment
- P - the initial balance
- r - the annual interest rate
- m - the number of times the interest is compounded per year
- t - the numbers of years the money is invested for
Analyzing the given information we have the next:
- P = 300
- r = 2% = 0.02
- m = quarterly = 4
- t = 3
Now, replacing the values in the formula
Finally, simplifying and rounding to the nearest cent
ANSWER:
After 3 years, the investment results in $318.50