Question

How much money would you have if you invested $2500 at 5.75% annual interest, compounded quarterly for 5 years

Answer 1

`A\simeq3325.91`

Explanation:

The amount formula in compound interest is:

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

where:

P = principal amount

r = annual interest

n = number of compounding periods

t = number of years

We already know that:

P = $2500

`r = 5.75\% = (5.75\%)/(100\%)=0.0575`

t = 5

n = 4 (quarterly in a year)

Then,

`A=2500(1+(0.0575)/(4) )^((4)(5))\\\\A=2500(1+(0.0575)/(4) )^(20)\\\\A=3325.911985\\\\A\simeq3325.91`