Question

A sum of $10,000 is invested at an annual rate of 8%. Find the balance in the account after 5 years subject to quarterly compounding. Round to the nearest cent.

Answer 1

Answer:

$14,859.47

Step-by-step explanation:

Lets use the compound interest formula provided to solve this:

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

P = initial balance

r = interest rate (decimal)

n = number of times compounded annually

t = time

Our first step is to change 8% into a decimal:

8% -> $\frac{8}{100}$ -> 0.08

Since the interest is compounded quarterly, we will use 4 for n. Lets plug in the values now:

$A=10,000(1+\frac{0.08}{4})^{4(5)}$

$A=14,859.47$

The balance after 5 years subject to quarterly compounding is $14,859.47