Question

Isabella opened and deposited $1000 in a 5% quarterly compound interest savings account. She deposits $25 in the account each month. Use an online savings calculator to find how much money will be in the account at the end of 5 years?

Answer 1

4,620.77

Explanation:

To calculate the final amount in Isabella's savings account at the end of 5 years, we need to take into account the initial deposit, monthly deposits, and quarterly compound interest.

Using the given information, we can break down the calculation into multiple steps:

Calculate the total number of quarters in 5 years: 5 years * 4 quarters per year = 20 quarters.

Calculate the interest rate per quarter: 5% annual interest rate / 4 quarters = 1.25% quarterly interest rate (expressed as a decimal, 0.0125).

Calculate the total amount of monthly deposits over 5 years: $25 per month * 12 months per year * 5 years = $1500.

Use an online savings calculator or the compound interest formula to determine the final amount in the account. The formula for compound interest is given by:

Final Amount = Initial Deposit + Monthly Deposits + (Initial Deposit + Monthly Deposits) * (1 + Quarterly Interest Rate)^(Number of Quarters)

Plugging in the values:

Final Amount = $1000 + $1500 + ($1000 + $1500) * (1 + 0.0125)^(20)

Using an online savings calculator or performing the calculation, the final amount in Isabella's savings account at the end of 5 years will be approximately $4,620.77.