Final answer:
To determine the amount of interest earned if $500 is invested at an interest rate of 4.25% compounded quarterly for 12 years, the interest earned is approximately $434.44.
Step-by-step explanation:
To determine the amount of interest earned if $500 is invested at an interest rate of 4.25% compounded quarterly for 12 years, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
where:
- A is the future amount (including principal and interest)
- P is the principal amount (initial investment)
- r is the annual interest rate (in decimal form)
- n is the number of times interest is compounded per year
- t is the number of years
Plugging in the values, we get:
A = 500(1 + 0.0425/4)^(4*12)
Simplifying the calculation, the interest earned is approximately $434.44.