Question

Flora Kenyon made a deposit of $1,600 to her savings account on July 1. For the next year she made no other deposits or withdrawals. Her bank pays an annual interest of 3.1% compounded quarterly. Find the interest earned by Flora by July 1 of the next year.

Answer 1

A = $1,650.24

Explanation:

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

Where

A = future value

P = present value = $1,600

r = interest rate = 3.1% = 0.031

n = number of periods = 4

t = time = 1 year

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

= 1,600( 1 + 0.031 / 4)^4*1

= 1600( 1 + 0.00775)^4

= 1600(1.00775)^4

= 1600(1.0314)

= 1,650.24

A = $1,650.24