Question

If $650 is invested in a bank account that earns a nominal 2.5% yearly interest, compounded quarterly, then how much is the investment worth after 10 years

Answer 1

`\$833.97`

Explanation:

we know that

The compound interest formula is equal to

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

where

A is the Final Investment Value

P is the Principal amount of money to be invested

r is the rate of interest in decimal

t is Number of Time Periods

n is the number of times interest is compounded per year

in this problem we have

`t=10\ years\\ P=\$650\\ r=2.5\%=2.5/100=0.025\\n=4`

substitute in the formula above

`A=650(1+(0.025)/(4))^(4*10)`

`A=650(1.00625)^(40)`

`A=\$833.97`