Question

Use the formula Imported Asset to find the amount in a compound interest account after t years, compounded n times a year. Mary deposited $5,600 in an account, which compounded 1.9 percent quarterly, and left it there for 10 years. What was the amount in the account at the end of 10 years? Round to the nearest dollar.

Answer 1

$ 6,769.00

Step-by-step explanation:

The formula for calculating future values is as below. Future value is the balance that will be in the account at the end of a stated period.

FV = PV × (1+r)n

where

FV = Future Value

PV = Present Value: $5600

r = annual interest rate: 1.9

n = number of periods:10 years

In this case, the interest is compounded quarterly. They are four quarters in a year. Hence, the quarterly interest rate will be 1.9 divided by four, which is 1.9/4=0.475%

The time n is 10years. Each year has four compounds. 10 years will have 10 x 4 = 40.

FV= $5600 x ( 1+0.475%)40

FV= $5600 x (1+0.00475)40

Fv= $5600 x 1.20870576

Fv = $ 6,769.00