Question

Karen deposits $3,500 in a savings account that pays 0.8% interest, compounded quarterly. Find the second quarter’s interest. Round to the nearest cent.

Answer 1

3500(1+0.008)square 3444.224

3500x(3444.224)=12054784

12054784-3500=12051284

Answer 2

Given the information, we have that the present value is $3500, the rate of interest is 0.8%=0.008 and we want to know the second quarter's interest, that is, t=2, then:

`\begin{gathered} FV=3500\cdot(1+0.008)^2 \\ =3500\cdot(1.016064)=3556.22 \end{gathered}`

Therefore, the future value of the savings account for the second quarter is 3556.22. To find the interest, we just substract the present value from this result:

`i=3556.22-3500=56.22`

therefore, the second quarter interest is $56.22