Question

After 4 years, what is the total amount of an investment of $1500 in an account paying 2.5% interest, compounded quarterly?
a. $1827.60
b. $1576.66
c. $1657.24
d. $2226.76

Answer 1

Answer:

c. $1657.24

Explanation:

Since, the amount formula,

$A=P(1+\frac{r}{n})^{nt}$

Where,

P = principal,

r = annual rate,

n = number of compounding periods,

t = number of years

Here, P=$1500, r = 2.5% = 0.025, t = 4 years, n = 4 ( number of quarters in a year )

Hence, the amount after 4 years,

$A=1500(1+\frac{0.025}{4})^{16}$

$\approx 1657.24$  ( Using calculator )

i.e. Option 'c' is correct