Question

After 8 years, what is the total amount of a compound interest investment of $25,000 at 3% interest, compounded quarterly?
A) $25,377.11
B) $25,759.92
C) $26,148.50
D) $31,752.78

Answer 1

25000(1+0.03/4)^32=????? Hope it helps :-)

Answer 2

The correct answer is:

D) $31,752.78

Explanation:

The formula for compound interest is:

$A=p(1+\frac{r}{n})^{n\times t}$,

where A is the total amount, p is the principal invested, r is the interest rate as a decimal number, n is the number of times per year the interest is compounded, and t is the number of years.

The principal in this problem is 25,000; the interest rate is 3% = 3/100 = 0.03; the number of times the interest is compounded is 4; and the number of years is 8:

$A = 25000(1+\frac{0.03}{4})^{4\times 8} \\ \\=25000(1+0.0075)^{32} \\ \\=25000(1.0075)^{32} \approx 31752.78$