Question

If $3500 is invested at the rate of 8%, compounded quarterly, what will be the value of the investment 17 years from now, assuming no withdrawals?

Answer 1

We will use the compound interest formula, which is

A = P(1+r/n)^(n*t)

The variables are

A = amount in the account after t years
P = initial amount invested
r = interest rate (in decimal form)
n = compounding frequency
t = number of years

In this case

A = unknown (we're solving for this)
P = 3500
r = 0.08 (8% = 8/100 = 0.08)
n = 4 (compound quarterly ---> compound 4 times a year)
t = 17

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Plug all these values into the equation to get...

A = P(1+r/n)^(n*t)
A = 3500(1+0.08/4)^(4*17)
A = 3500(1+0.02)^(4*17)
A = 3500(1.02)^(4*17)
A = 3500(1.02)^(68)
A = 3500(3.8442505025456)
A = 13454.8767589096
A = 13454.88

This means that you will have $13454.88 in the account after 17 years

Final Answer: 13454.88