Final answer:
To calculate the future value of an investment with compound interest, use the formula Future Value = Principal x (1 + (Interest Rate / Number of Compounding Periods)) ^ (Number of Compounding Periods x Number of Years). Plugging in the values, we find that the future value is approximately $1,210.26.
Step-by-step explanation:
To calculate the future value of an investment with compound interest, you can use the formula:
Future Value = Principal x (1 + (Interest Rate / Number of Compounding Periods)) ^ (Number of Compounding Periods x Number of Years)
In this case, the principal is $1000, the interest rate is 3.50%, the number of compounding periods is 4 (due to quarterly compounding), and the number of years is 5. Plugging in these values into the formula, we get:
- Future Value = $1000 x (1 + (0.035 / 4)) ^ (4 x 5)
- Future Value = $1000 x (1 + 0.00875) ^ 20
- Future Value = $1000 x 1.00875 ^ 20
Using a calculator or spreadsheet, we can calculate that the future value is approximately $1,210.26.