Question

You deposit $2500 in an account that earns 2.5% annual interest. Find the balance after one year if the interest is compounded quarterly?

Answer 1

$2563.09

General Formulas and Concepts:

Math

• Percents

Pre-Algebra

Order of Operations: BPEMDAS

1. Brackets
2. Parenthesis
3. Exponents
4. Multiplication
5. Division
6. Addition
7. Subtraction

• Left to Right

Algebra I

Compounded Interest Rate Formula:
`\displaystyle A = P(1 + (r)/(n))^(nt)`

• A is final amount
• P is principle amount
• r is rate
• n is compounded rate
• t is time

Explanation:

Step 1: Define

P = 2500

r = 0.025

n = 4

t = 1

Step 2: Find A

1. Substitute in variables [Compounded Interest Rate]:
   `\displaystyle A = 2500(1 + (0.025)/(4))^(4(1))`
2. (Parenthesis) Add:
   `\displaystyle A = 2500(1.00625)^(4(1))`
3. [Exponents] Multiply:
   `\displaystyle A = 2500(1.00625)^(4)`
4. Evaluate exponents:
   `\displaystyle A = 2500(1.02524)`
5. Multiply:
   `\displaystyle A = 2563.09`