Question

supposed your friend was born, your friends parents deposited $2000 in an account paying 3.5% interest compound quarterly. what will the account balance be after 5 years?

Answer 1

Apply the compound interest formula:

A = P (1+r/n)^nt

where:

A = future vale

P = Principal investment = $2000

r= interest rate (decimal form) = 3.5 /100= 0.035

t= years

n= number of compounding periods per year (4)

Replacing:

A = 2000 (1 + 0.035/4)^4(5)

A = 2000 ( 1.00875)^20

A= $2,380.68