Question

Find the amount to which $2,500 will grow if interest of 6.75% is compounded quarterly for 10

Answer 1

Answer:

Part a

For this case n = 4. If we use the future value formula we got:

$A= 2500 (1+ \frac{0.0675}{4})^{4*10}= 4882.506$

Part b

For this case n = 365. If we use the future value formula we got:

$A= 2500 (1+ \frac{0.0675}{365})^{365*10}= 4909.776$

Step-by-step explanation:

We can use the future vaue formula for compound interest given by:

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

Where P represent the present value, r=0.0675 , n is the number of times that the interest is compounded in a year and t the number of years.

Part a

For this case n = 4. If we use the future value formula we got:

$A= 2500 (1+ \frac{0.0675}{4})^{4*10}= 4882.506$

Part b

For this case n = 365. If we use the future value formula we got:

$A= 2500 (1+ \frac{0.0675}{365})^{365*10}= 4909.776$