Question

You deposit $5000 in an account that pays 2.25% annual interest. Find the balance after 5 years when the interest is compounded quarterly.

Answer 1

Answer:

$5,593.60

Step-by-step explanation:

Lets use the compound interest formula provided to solve this:

$A=P(1+\frac{r}{n} )^{nt}$

P = initial balance

r = interest rate (decimal)

n = number of times compounded annually

t = time

First, change 2.25% into a decimal:

2.25% -> $\frac{2.25}{100}$ -> 0.0225

Since the interest is compounded quarterly, we will use 4 for n. Lets plug in the values now:

$A=5,000(1+\frac{0.0225}{4})^{4(5)}$

$A=5,593.60$

The balance will be $5,593.60