Question

You deposit $5000 in an account earning 2.0% interest compounded quarterly. How much interest will you earn over 12 years? Round your answer to the nearest cent.​

Answer 1

The future value of P at interest rate r compounded n times per year for t years is ...

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

4000 = P(1 +.08/4)^(4·10)

P = 4000·1.02^-40 ≈ 1811.56

$1811.56 must be deposited now in order to have $4000 in 10 years.

Explanation: