Question

Suppose 2500 dollars is invested at 4% for 5 years. Find the account balance if it is

compounded daily, monthly, quarterly?
answer step by step

Answer 1

Kindly check explanation

Explanation:

Using the compound interest formula :

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

A = final amount ; r = rate ; n = number of compounding times per period ; t = period ; P = principal

P = 2500 ; r = 4% = 0.04 ; t = 5 years

Daily compounding, n = 365

Yearly compounding, n = 1

Quarterly compounding, n = 4

Daily compounding :

A = 2500(1 + 0.04/365)^(5*365)

A = 2500(1.0001095)^1825

A = $3053.4734

Yearly :

A = 2500(1 + 0.04/1)^(5*1)

A = 2500(1.04)^5

A = $3041.6323

Quarterly:

A = 2500(1 + 0.04/4)^(5*4)

A = 2500(1.01)^20

A = $3050.4751