Question

Which of the following is the balance for a single $3,200 deposit in an account with an APR of 2.6% that compounds interest quarterly and is invested for 6 years?

Answer 1

Answer:

$FV= 3200(1+\frac{0.026}{3})^{3(6)}=3200 (1.008667)^{54}= 50994.590$

Step-by-step explanation:

For this case we can use the formula for the future value with compound interest given by:

$FV= P (1+\frac{r}{n})^{nt}$   (1)

For this case since the interest is compounded quarterly we have 3 periods each year, since we have 3 quarters in a year.

r represent the rate =0.026

t = 6 represent the number of years

P = 3200 represent the amount invested at the begin

If we apply the formula (1) we got:

$FV= 3200(1+\frac{0.026}{3})^{3(6)}=3200 (1.008667)^{54}= 50994.590$

So then the balance after 6 years would be approximately 50995 with the conditions provided.