Question

A sum of $10,000 is invested at an annual rate of 8%. Find the balance in the account after

5 years subject to quarterly compounding. Round to the nearest cent.

Answer 1

$14,859.47

Explanation:

Lets use the compound interest formula provided to solve this:

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

P = initial balance

r = interest rate (decimal)

n = number of times compounded annually

t = time

First change 8% into a decimal:

8% ->
`(8)/(100)` -> 0.08

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

`A=10,000(1+(0.08)/(4))^(4(5))`

`A=14,859.47`

The balance after 5 years is $14,859.47