Question

You deposit $100 in an account that pays 6 percent annual interest, compounded quarterly. What will your deposit grow to in 3 years? $119.56 $134.69 $ 170.91 $ 192.53 $ 216.89

Answer 1

$119.56

Step-by-step explanation:

We will use compound interest formula to solve this problem.

The formula is:

`F=P(1+r)^t`

Where

F is the future value

P is the present amount

r is the rate of interest per period

t is the number of periods

Here,

F is the value we want, after 3 years

P is the present amount, $100

r is the rate of interest per quarter (per period)

Given r = 6% annually, so that would make:

6%/4 = 1.5% per quarter, or 1.5/100 = 0.015

Also, t is the number of quarters in 3 years, that would be 4*3 = 12

Now, substituting, we get our answer:

`F=P(1+r)^t\\F=100(1+0.015)^(12)\\F=100(1.015)^(12)\\F=119.56`

The first answer choice is right, $119.56