Question

Find the future value of 575 at 5.5% compounded quarterly for 5 years. Round to the nearest cent

Answer 1

Future value = $755.61 ( to the nearest cent)

Explanation:

The formula for calculating the future value of an invested amount compounded periodically for a number of years is given as:

`FV = PV (1+(r)/(n) )^(n*t)`

where:

FV = future value = ???

PV = present value = $575

r = interest rate in decimal = 5.5% = 0.055

n = number of compounding periods per year = quarterly = 4

t = time of investment = 5 years

∴
`FV = 575 (1+(0.055)/(4) )^(4*5)`

`FV = 575 (1+0.01375)^(20)\\FV = 575 (1.01375 )^(20)\\FV = 575 * 1.3141\\FV = 755.607`

∴ Future value = $755.61 ( to the nearest cent)