Question

2. Determine the amount of an investment if $500 is invested at an interest rate of 6.75%

compounded quarterly for 10 years.

Answer 1

$976.50

Explanation:

Lets use the compound interest formula to solve:

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

P = initial balance

r = interest rate (decimal)

n = number of times compounded annually

t = time

Lets change 6.75% into a decimal first:

6.75% ->
`(6.75)/(100)` -> 0.0675

Since the interest is compounded quarterly, we will use 4 for n. Lets plug in the values now:

`A=500(1+(0.0675)/(4))^(4(10))`

`A=976.50`

The investment is worth $976.50 after 10 years.