Question

You deposit $975.52 in a bank account. Find the balance after 4 years if the account pays 7.25% annual interest compounded quarterly

Answer 1

The final ballance will be $1300.37.

Explanation:

In this case we have a compounded interest, in order to calculate the final balance we need to use the following formula:

S = P(1 + r/n)^(n*t)

Where S is the final balance, P is the initial investment, r is the rate of interest, t is the time and n is the rate at which it is compounded. Since we have all the values we can directly apply to the formula as follows:

S = 975.52*(1 + 0.0725/4)^(4*4)

S = 975.52*(1.018125)^(16)

S = 975.52*1.333

S = 1300.37

The final ballance will be $1300.37.