Question

You deposit $1800 into a bank account that pays 5% annual interest. Find the balance after 7 years if the interest is compounded quarterly. Round to the nearest cent

Answer 1

The balance after 7 years would be $2,548.79

Explanation:

We are given the following in the question:

P = $1800

r = 5% = 0.05

t = 7 years

The compound interest is given by:

`A = p\bigg(1+(r)/(n)\bigg)^(nt)`

where A is the amount, p is the principal, r is the interest rate, t is the time in years and n is the nature of compound interest.

When compounded quarterly, n = 4

Putting values, we get,

`A = 1800\bigg(1+(0.05)/(4)\bigg)^(28)\\\\A = \$2,548.79`

Thus, the balance after 7 years would be $2,548.79