Question

Carlos knows that he had deposited $100 in a bank account that earns 25% interest compounded quarterly. How much money will he have in 4 years?

Answer 1

We have the following:

To calculate the total amount of money compounded monthly or quarterly we use the formula below n = number of times interest is compounded per year

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

where P is $100, r is 25% or 0.25 and n is 4, replacing:

$\begin{gathered} A=100(1+\frac{0.25}{4})^{4\cdot4} \\ A=100\cdot1.0625^{16} \\ A=100\cdot2.648 \\ A=264.8 \end{gathered}$

Therefore, in 4 years have $264.8