Question

If Emily makes a one-time deposit of $400 at 12% compounded quarterly for 8 years, what is the value of the investment in 8 years

Answer 1

The total amount accrued, principal plus interest, with compound interest on a principal of $400.00 at a rate of 12% per year compounded 4 times per year over 8 years is $1,030.03.

What is compound interest ?

Compound interest is the addition of interest to the principal sum of a loan or deposit, or interest on interest plus interest.

Compound interest is when you earn interest on both your savings and your interest earnings. Assume you invest $1,000 (your principal) and earn 5% (interest rate or earnings) once a year (the compounding frequency).

Compound interest works by adding accumulated interest to your principal (the amount you put into the savings account), which then begins earning interest. Essentially, your interest begins to earn its own interest.

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