Question

imagine you open a savings bank account that has an annual percentage rate of 6% with interest compounded quarterly

Answer 1

You will have $1,346.86 in your account after 5 years if you deposit $1,000 today.

How to determine the amount you will have in the account after 5 years

From the question, we have the following parameters that can be used in our computation:

Rate of interest = 6%

The amount of money is calculated as

`A = P * (1 + \frac rn)^(nt)`

Where:

• A is the accumulated amount
• P is the principal amount ($1,000)
• r is the annual interest rate (6% = 0.06)
• n is the number of compounding periods per year (4)
• t is the number of years (5)

Substitute the known values into the equation

`\text{A} = 1000 * (1 + (0.06)/(4))^(4 * 5)`

This gives

A = 1000 * (1 + 0.015)²⁰

So, we have

A = 1000 * (1.015)²⁰

Evaluate the exponent

A = 1000 * 1.346855

Lastly, we have

A = 1346.855

Approximate

A = 1346.86

Hence, you will have $1,346.86 in your account after 5 years if you deposit $1,000 today.

Question

Imagine you open a savings bank account that has an annual percentage rate of 6% with interest compounded quarterly. How much money will you have in the account after 5 years if you deposit $1,000 today?