Final answer:
Using the compound interest formula, the employee who made an initial deposit of $1000 in a savings plan with 8% interest compounded quarterly, would have approximately $1485.95 in their account after five years.
Step-by-step explanation:
The Smarter and Sons company has a savings plan that offers an 8% interest compounded quarterly. To calculate the final amount in the account after five years with an initial deposit of $1000, we can use the compound interest formula:
A = P(1 + r/n)(nt)
Where:
- A is the amount of money accumulated after n years, including interest.
- P is the principal amount (the initial amount of money).
- r is the annual interest rate (in decimal).
- n is the number of times that interest is compounded per year.
- t is the time the money is invested for, in years.
In this case, we have:
- P = $1000
- r = 0.08
- n = 4 (since the interest is compounded quarterly)
- t = 5
Plugging these values into the formula gives us:
A = 1000(1 + 0.08/4)(4*5)
Calculating the above expression:
A = 1000(1 + 0.02)20 = 1000(1.02)20
A = 1000 * 1.485947 = $1485.95 (approximately)
After five years, the employee would have approximately $1485.95 in their account.