Question

An amount of $4000 was deposted in a bank of 7% compounded quarterly for 2 years. The rate the increased to 10% and was compounded quarterly for the next 2 years. If no money was

balance at the end of this time?

The balance was $=
(Round to the nearest cant as needed)

Answer 1

$5599.20

Explanation:

The quarterly interest rate for the first two years was ...

7%/4 = 0.0175

So, the multiplier each quarter for those 8 quarters was 1+0.0175 = 1.0175. At the end of the first 8 quarters, the account value had been multiplied by ...

1.0175^8

For the next 8 quarters, the quarterly interest rate was 10%/4 = 0.025. So at the end of those 8 quarters, the balance had been multiplied by ...

1.025^8

Then the balance at the end of 4 years was ...

$4000(1.0175^8)(1.025^8) ≈ $5599.20

The balance was $5599.20.