Question

Derek deposits $2000 into an investment account that pays 4.5% annual interest compounded quarterly. What will be the balance after 15 years? Round to the nearest cent.

Answer 1

`\$\;3,913.29`

Explanation:

Balance after 15 years, compounded quarterly at 4.5% on a principal of is given by the formula

`A = 2000 \left( 1 + (0.045)/(4)\right)^(4 * 15)`

0045 is interest rate in decimal = 4.5/100

We divide by 4 since interest is compounded quarterly

we multiply 15 years by 4 since there are 4 quarters in every year and therefore 4 x 15 = 60 quarters in 15 years

`A = 2000 \left( 1 + 0.01125\right)^(60)\\\\A = 2000(1.01125)^(60)\\\\A = \$\;3,913.29`