Question

If $650 is invested in a bank account that earns a nominal 2.5% yearly interest, compounded quarterly, then how much is the investment worth after 10 years

Answer 1

Answer:

$\ 833.97$  

Step-by-step explanation:

we know that    

The compound interest formula is equal to  

$A=P(1+\frac{r}{n})^{nt}$  

where  

A is the Final Investment Value  

P is the Principal amount of money to be invested  

r is the rate of interest  in decimal

t is Number of Time Periods  

n is the number of times interest is compounded per year

in this problem we have  

$t=10\ years\\ P=\ 650\\ r=2.5\%=2.5/100=0.025\\n=4$  

substitute in the formula above

$A=650(1+\frac{0.025}{4})^{4*10}$  

$A=650(1.00625)^{40}$  

$A=\ 833.97$