Question

Michael deposited $500 in the bank.The bank pays michael interest compounded quarterly at the rate of 4 percent per year. How much money will michael hane in his account at the end of 9 months?

Answer 1

Answer: the amount in the account would be $515.15

Step-by-step explanation:

Initial amount deposited into the account is $500 This means that the principal is

P = 500

It was compounded quarterly. This means that it was compounded four times in a year. So

n = 4

The rate at which the principal was compounded is 4%. So

r = 4/100 = 0.04

The money would be compounded for 9 months. So

t = 9 months = 9/12 = 0.75

The formula for compound interest is

A = P(1+r/n)^nt

A = total amount in the account at the end of t years. Therefore

A = 500 (1+0.04/4)^ 4 × 0.75

A = 500(1.01)^3= $515.15