Question

The basic equation for calculating compound interest is A=P(1+r/n)^(nt). If 2000$ is invested at an interest rate of 5% per year compound quarterly , how much will the investment be at the end of 8 years? Show work!

Answer 1

A=final amount
P=amount invested
r=rate in decimal form
n=number of times per year compounded
t=time in years


so
given
P=2000
r=5%=0.05
n=4 (quarterly means 4 times per year)
t=8

A=2000(1+0.05/4)^(4*8)
A=2000(1+0.0125)^(32)
A=2000(1.0125)^(32)
use calculator
A=2976.26101
round to nearest cent
$2976.26

it will be worth $2976.26 after 8 years

Answer 2

Hi there
The formula is
A=P(1+r/n)^(nt)
A future value?
p Present value 2000
R interest rate 0.05
N compounded quarterly 4
T time 8 years

So
A=2,000×(1+0.05÷4)^(4×8)
A=2,976.26

Hope it helps