Question

You are making an initial deposit of $1000 in an account that yields 5% interest quarterly (four times a year).

Following the pattern given above, find your year-end balance. (Show calculations for all four quarters and round to the nearest
penny) 15 pts

Answer 1

Answer: The interest rate per quarter is 5%/4 = 1.25%.

At the end of the first quarter, the balance is:

$1000 + $1000(1.25%) = $1000 + $12.50 = $1012.50

At the end of the second quarter, the balance is:

$1012.50 + $1012.50(1.25%) = $1012.50 + $12.66 = $1025.16

At the end of the third quarter, the balance is:

$1025.16 + $1025.16(1.25%) = $1025.16 + $12.82 = $1037.98

At the end of the fourth quarter, the balance is:

$1037.98 + $1037.98(1.25%) = $1037.98 + $13.00 = $1050.98

Therefore, the year-end balance is $1050.98 (rounded to the nearest penny).

Explanation: