Question

Find the amount to which $2,500 will grow if interest of 6.75% is compounded quarterly for 10

years.



Find the amount to which $2,500 will grow if interest of 6.75% is compounded daily for 10
years.

Answer 1

Part a

For this case n = 4. If we use the future value formula we got:

`A= 2500 (1+ (0.0675)/(4))^(4*10)= 4882.506`

Part b

For this case n = 365. If we use the future value formula we got:

`A= 2500 (1+ (0.0675)/(365))^(365*10)= 4909.776`

Explanation:

We can use the future vaue formula for compound interest given by:

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

Where P represent the present value, r=0.0675 , n is the number of times that the interest is compounded in a year and t the number of years.

Part a

For this case n = 4. If we use the future value formula we got:

`A= 2500 (1+ (0.0675)/(4))^(4*10)= 4882.506`

Part b

For this case n = 365. If we use the future value formula we got:

`A= 2500 (1+ (0.0675)/(365))^(365*10)= 4909.776`