Question

Liz opened a savings account and deposited $1,000.00 as principal. The account earns 8% interest, compounded quarterly. What is the balance after 4 years?

Answer 1

After the first quarter, the interest earned would be:

$1,000.00 * 0.02 = $20.00

So the new balance would be:

$1,000.00 + $20.00 = $1,020.00

After the second quarter, the interest earned would be:

$1,020.00 * 0.02 = $20.40

So the new balance would be:

$1,020.00 + $20.40 = $1,040.40

After the third quarter, the interest earned would be:

$1,040.40 * 0.02 = $20.81

So the new balance would be:

$1,040.40 + $20.81 = $1,061.21

After the fourth quarter, the interest earned would be:

$1,061.21 * 0.02 = $21.22

So the final balance after 4 years would be:

$1,061.21 + $21.22 = $1,082.43

Therefore, the balance after 4 years would be $1,082.43.