Question

If you invested $100 at an interest rate of 5% per year compounded quarterly, how much will the investment be worth at the end of two years? *
50 points

Answer 1

Answer: the investment would be

$110.45

Step-by-step explanation:

Initial amount deposited into the account is $100 This means that the principal is

P = 100

It was compounded quarterly. This means that it was compounded 4 times in a year. So

n = 4

The rate at which the principal was compounded is 5%. So

r = 5/100 = 0.05

It was compounded for 2 years. So

t = 2

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 = 100 (1+0.05/4)^4×2

A = 100 (1.0125)^8

A = $110.45