Question

Tom deposits $2,000 into an account with an interest rate of 2.5% that is compounded quarterly. Rounding to the nearest dollar, what is the balance in Tom's account after 5 years?

Answer 1

The balance in Tom's account is = $ 2265.41

Explanation:

Principal amount = $ 2000

Rate = 2.5 %

Time = 5 years

Since Amount is compounded quarterly so

New rate of interest =
`(2.5)/(4) = 0.625`

Time = 5 × 4 = 20 years

Now the amount in the account is given by

`A = P (1+(R)/(100) )^(T)`

`A = 2000 (1+(0.625)/(100) )^(20)`

A = $ 2265.41

Therefore the balance in Tom's account is = $ 2265.41