Question

Rick's savings account has a balance of $5000. If he does not make a

withdrawal or deposit, how much money will be in Rick's account if it pays an
annual interest rate of 6% for 8 years compounded quarterly?

Answer 1

Rate of interest

• 0.06/4=0.015

So

Compound ineterest formula to be used

• A=P(1+r)^t
• A=5000(1+0.015)⁴×⁸
• A=5000(1.015)³²
• A=$8051.6

Answer 2

$8,051.62

Explanation:

Compound interest formula

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

where:

• A = final amount
• P = principal
• r = interest rate (in decimal form)
• n = number of times interest applied per time period
• t = number of time periods elapsed

Given:

• P = $5000
• r = 6% = 0.06
• n = 4
• t = 8

Substituting given values into the formula:

`\implies \sf A=5000(1+(0.06)/(4))^(4 * 8)`

`\implies \sf A=5000(1.015)^(32)`

`\implies \sf A=8051.62\:(nearest\:hundredth)`