Question

Alex invests $12,500 in a savings account that pays 2.75% interest compounded quarterly. how much money will he have in the account after 10 years?

Answer 1

Principle amount to be invested = 12500

Rate of interest = 2.75% or 0.0275

Interest is compounded quarterly so n= 4

Time = 10 years

Compound interest formula is : $A=P(1+\frac{r}{n})^{nt}$

Putting values in this formula we get,

A= $12500(1+\frac{0.0275}{4} )^{4*10}$

= $12500(\frac{4+0.0275}{4})^{40}$

= $12500(1.006875)^{40}$

= $12500\times1.31529$

= 16441.125

Hence, the account will have $16441.125 after 10 years.

Answer 2

Total = Principal * (1 + (rate/n))^n*years
where n is the number of compounding periods per year
Total = 12,500 * (1 + (.0275/4) )^40
Total = 12,500 * (1.006875) ^40
Total = 12,500 * 1.3152923995
Total = 16,441.16

Source:
http://www.1728.org/compint.htm