Question

7. John deposited $10,000 to open a new savings account that earned 4 percent annual interest, compounded quarterly. If there were no other transactions in the account, what was the amount of money in John's account 6 months after the account was opened?

Answer 1

$ 10, 201

Step-by-step explanation:

The formula for calculating the future balance of the account at the end of a stated period is as below.

FV = PV × (1+r)n

In this case

FV = Future Value

PV = Present Value: $10,000

r = annual interest rate: 4 year

n = number of periods:1 years

The interest is compounded quarterly or four times per year. The quarterly interest rate will be

4/4=1 %

The time is one year. After six months, the amount will have been compounded twice. N will be 2

FV= $10,000 x ( 1+1%)2

FV= $10,000 x (1+0.001)2

Fv= $10,000 x 1.0201

Fv = $ 10, 201