Question

If $500 is invested at 8% annual interest, how much will be in the account after 3 years if it's compounded quarterly?

Answer 1

FV= $634.12

Explanation:

Giving the following formula:

Initial investment (PV)= $500

Number of periods (n)= 3*4= 12 quarters

Interest rate (i)= 0.08/4= 0.02

To calculate the future value, we need to use the following formula:

FV= PV* (1 + i)^n

FV= 500*(1.02^12)

FV= $634.12