Question

Monica opens a savings account with an initial deposit of $500. She earns 3.6% compound interest each quarter. How much would the final balance of the savings account be after 5 years if Monica makes quarterly deposits of $50? Use an online calculator, then round your answer to the nearest whole number.

Answer 1

`P =500, r = 0.036, t = 5 , n=4`

n=4 because we have a quarterly rate

After replace the values given we got:

`A =500 (1+(0.036)/(4))^(4*5) = 598.127`

If we round this answer to the nearest number we got approximately $598 after 5 years.

Explanation:

For this case we can ue the compund interest formula for the future value given by:

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

Where P represent the initial amount , t the number of years and r the rate of interest on fraction. The value of n represent the number of times that the interest rate is compound in a year

For our case we have:

`P =500, r = 0.036, t = 5 , n=4`

n=4 because we have a quarterly rate

After replace the values given we got:

`A =500 (1+(0.036)/(4))^(4*5) = 598.127`

If we round this answer to the nearest number we got approximately $598 after 5 years.