Question

How much will $2500 left in an an account earning 7.3% interest compounded quarterly be worth in 5 years?

Answer 1

The compound interest has the capacity to capitalize on the interest of the previous period, that is to say that it converts the interest earned in a period into capital for the following one, in this way the formula of the compound interest is:

$V_{f} = V_{p} (1 + i)^n$

Where $V_{f}$ is the future value or capital that will remain, $V_{p}$ the present or initial value, $i$ the interest rate per period and $n$ the number of periods to be capitalized, in this case we have a present value of $2,500, a quarterly rate of 7.3% , that is to say 4 in a year, as they are 5 years, we obtain 4 * 5 = 20 periods, with this we calculate

$2500(1+\frac{7,3}{100} )^{20} =10,231.39$

Answer

$ 10,231.39 will remain in the account