Question

A man invests $2000 in an account that pays 8.5% interest per year, compounded quarterly. (a) find the amount after 2 years? (round your answer to the nearest cent.)

Answer 1

A man invests $2000 into an account that accrues 8.5% interest compounded quarterly. He made the deposit of 2 years , i.e. for 8 quarters ( or 8 compounding periods)

Amount after n years is calculated by following equation :

Amount = Principal * ( 1 + Interest rate per compounding period ) ^ no. of compounding periods

The amount in his account after 2 years = 2000 * ( 1 + 0.085/4) ^ 8

= 2000 * (1.02125 ) ^ 8

= 2000 * 1.18319

= $2366.39