Question

Suppose your bank compounds interest quarterly (four times a year). How much will your current balance of $897 will become in 7 years if the bank gives an annual rate of return of 12%? (Round up your answer to two decimal point)

Answer 1

To calculate the future value of an investment with compound interest, use the formula FV = PV * (1 + r/n)^(n*t). Plugging in the provided values, the current balance of $897 will become $1,848.59 in 7 years.

Step-by-step explanation:

To calculate the future value of an investment with compound interest, you can use the formula:

FV = PV * (1 + r/n)^(n*t)

Where:

• FV is the future value or the balance you want to find
• PV is the present value or the current balance ($897 in this case)
• r is the annual interest rate (12% or 0.12 in decimal form)
• n is the number of times interest is compounded per year (quarterly in this case, so n = 4)
• t is the number of years (7 in this case)

Plugging in the values, we have:

FV = $897 * (1 + 0.12/4)^(4*7) = $1,848.59

Therefore, your current balance of $897 will become $1,848.59 in 7 years.