Question

Find the future value of $2,000 deposited into a retirement account, after 20 years, if the interest rate is 6%, compounded quarterly. (Use the formula for this problem) $_____

Answer 1

Answer:

$ 6581.33 ( approx )

Step-by-step explanation:

Since, future value formula in compound interest is,

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

Where,

P = Principal amount,

r = annual rate,

n = number of compounding periods in a year,

t = number of years,

Here, P = $ 2,000, r = 6% = 0.06, n = 4 ( 1 year = 4 quarters ),

t = 20 years,

Hence, the future value would be,

$A=2000(1+\frac{0.06}{4})^{80}$

$=2000(1+0.015)^{80}$

$=2000(1.015)^{80}$

$=\ 6581.32557398$

$\approx \ 6581.33$