An amount of $1000 was deposited in a bank at a rate of 6% compounded quarterly for 5 years. The rate then increased to 10% a nd was compounded quarterly for the next 5 years. If no money was withdrawn, what was the balance at the end of this time?
1 answer:
Answer:
FV= $2,206.979
Step-by-step explanation:
<em>Step 1: Find FV at the end of first 5 years at 6% rate; </em>
FV=PV(1+r)^t
since it's quarterly-compounded, r/4=6%/4 = 1.5% and t=5*4= 20 periods
FV= 1000 * (1.015)²⁰
FV=1000* 1.346855
FV=$1,346.855
<em>Step 2: Find FV of $1346.855 for the next 5 years at 10% rate;</em>
FV=PV(1+r)^t
since it's quarterly-compounded, r/4=10%/4 = 2.5% and t=5*4= 20 periods
FV= 1346.855 * (1.025)²⁰
FV=1346.855* 1.638616
FV=$2,206.979
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