Question

You open your first interest-bearing savings account with an initial deposit of

$2,500. Interest is compounded quarterly at a rate of 3.5%. Assuming you do not
deposit any more money into the account, how much money will you have in the
account after 5 years?

Answer 1

$2,975.85

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 3.5% into a decimal:

3.5% ->
`(3.5)/(100)` -> 0.035

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

`A=2,500(1+(0.035)/(4))^(4(5))`

`A=2,975.85`

After 5 years, the account will have $2,975.85