Question

You invest $5000 into an account earning 4% interest compounded quarterly. Write an

equation to represent the amount of money you will have in your account after 8 years?

Answer 1

A (in $USD) = 5,000(1 + .04/4)^4(8)

A = 5000(1 + 0.01)^32

A = 5000(1.01)^32

A = 5000(1.37494068)

A ≈ 6874.7034

A = $6875 or $6875.7 (depending on rounding requirement)

Explanation:

Compound Interest Formula

A = P(1+ r/n)^n(t)

• A is the amount in the account after t years
• P is the principal (original amount invested)
• r is the annual rate, expressed as a decimal
• n the number of times the interest is calculated a year*
• t is the number of years

*If the interest is compounded monthly n = 12, if quarterly n = 4, if daily n = 365.