Question

use the formula for computing future value using compound interest to determine the value of an account at the end of 5 years if a principal amount of $2,000 is deposited in an account at an annual interest rate of 4% and the interest is compounded quarterly

Answer 1

$2440.40

Step-by-step explanation:

time = t = 5 years

Principal = P = $2000

rate = r = 4% = 0.04

n = number of times compounded = quaterly

n = 4

FV = future value

Using compound interest formula:

`FV\text{ = P(1 +}(r)/(n))^(nt)`
`\begin{gathered} FV\text{ = 2000(1 +}(0.04)/(4))^(4*5) \\ FV\text{ = }2000(1+0.01)^(20) \\ FV=2000(1.01)^(20) \end{gathered}`
`\begin{gathered} FV\text{ = 2000 }*\text{ 1.220}2 \\ FV\text{ = \$2440}.40 \end{gathered}`