Question

If you had $1,000 in the bank and earned 2.5% interest, compounded quarterly, how much money would you have in your account after 1 year?

Answer 1

To calculate the amount of money you would have in your account after one year, you can use the compound interest formula. Plugging in the given values, the final amount in the account would be approximately $1,025.16.

Step-by-step explanation:

To calculate the amount of money you would have in your account after one year, we need to use the formula for compound interest:

• A = P(1 + r/n)^(nt)

Where:

• A is the final amount of money in the account
• P is the principal amount (initial amount)
• r is the annual interest rate (as a decimal)
• n is the number of times the interest is compounded per year
• t is the number of years

Plugging in the given values:

• P = $1,000
• r = 2.5% = 0.025
• n = 4 (compounded quarterly)
• t = 1 year

We can now calculate:

• A = $1,000(1 + 0.025/4)^(4*1)
• A = $1,000 * 1.006250^4
• A = $1,000 * 1.02515625
• A ≈ $1,025.16

After 1 year, you would have approximately $1,025.16 in your account.