Question

Damon deposits $2,240 into a savings account that earns 3½% interest compounded quarterly. What is his new balance after 6 months?

Answer 1

Given:

Principal, P = $2,240

Interest rate, r = 3½% = 3.5% = 0.035

Time, t = 6 months = 6/12 months a year = 0.5 years

Yearly deposits, n = 4 (quaterly)

Use the compound interest formula below:

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

Therefore, we have:

$A\text{ = 2240(1 + }\frac{0.035}{4})^{4\cdot0.5}$

Solving further,

$A\text{ = 2240 (1 + }0.1757)$$\begin{gathered} A\text{ = 2240( 1.01757)} \\ \text{ = }2279.3715 \end{gathered}$

Therefore his new balance after 6 months is $2279.37

ANSWER:

$2,279.37