Question

Walter's savings account has a balance of $273. After 5 years, what will the amount of interest be at 5% compounded quarterly?

Answer 1

Given:
Principal = $273
Interest rate = 5% compounded quarterly
time = 5 years

A = P (1 + r/n)^nt

A = amount of money accumulated plus interest
P = principal
r = interest rate (in decimal form)
n = number of times the interest is compounded per year
t = total number of years the amount is deposited

A = $273 (1 + 0.05/4)⁴*⁵
A = $273 (1 + 0.0125)²⁰
A = $273 (1.0125)²⁰
A = $273 * 1.2820
A = $349.99

$349.99 - 273 = $76.99

The compounded interest amounts to $76.99