Question

Find the final amount of money in an account if $6,500 is deposited at 2.5 % interest compounded quarterly(every 3 months) and the money is left for 5 years.The final amount is $Round answer to 2 decimal places

Answer 1

Apply compound interest formula:

A = p ( 1 + r/n)^ tn

Where:

A = final amount

p = principal = 6,500

r = interest rate = 2.5% = 2.5/100 = 0.025 ( decimal )

t = years = 5

n = number of times interest is compounded per unit t = 4

Replacing:

A = 6500 ( 1 + 0.025/4) ^ ( 5 * 4 )

A = 600 ( 1 + 6.25x10^-3)^ 20

A = 7,362.60

Answer: $ 7,362.60