The compounded interest is applied to the amount in the account at end
of a period specified in the rate of compounding.
- The amount in the account at the end of 6 quarters is approximately <u>$16,767.2</u>
Reasons:
The interest paid on the account = 4% compounding
Amount with which she opened the account = $10,000
Amount she makes as deposit at the end of each quarter = $1,000
Therefore;
The interest per quarter = 4% ÷ 4 = 1%
Amount in the account after the end first quarter, A₁, is therefore;
A₁ = 10,000 × 0.01 + 10,000 + 1,000 = 11,100
The amount in the second quarter, A₂, is given as follows;
A₂ = 11,100 × 0.01 + 11,100 + 1,000 = 12211
A₃ = 12211 × 0.01 + 12211 + 1,000 = 13333.11
A₄ = 13333.11 × 0.01 + 13333.11 + 1,000 = 14466.4411
A₅ = 14466.4411 × 0.01 + 14466.4411 + 1,000 = 15611.105511
At the end of the 6th quarter, we have;
A₆ = 15611.105511 × 0.01 + 15611.105511 + 1,000 = 16767.2165991
The amount in the account at the end of 6 quarters, A₆ ≈ $16,767.2
Learn more about compounding interest rate here:
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