Question

Find the future value of 575 at 5.5% compounded quarterly for 5 years. Round to the nearest cent

Answer 1

Answer:

Future value = $755.61 ( to the nearest cent)

Step-by-step explanation:

The formula for calculating the future value of an invested amount compounded periodically for a number of years is given as:

$FV = PV (1+\frac{r}{n} )^{n*t}$

where:

FV = future value = ???

PV = present value = $575

r = interest rate in decimal = 5.5% = 0.055

n = number of compounding periods per year = quarterly = 4

t = time of investment = 5 years

∴ $FV = 575 (1+\frac{0.055}{4} )^{4*5}$

$FV = 575 (1+0.01375)^{20}\\FV = 575 (1.01375 )^{20}\\FV = 575 * 1.3141\\FV = 755.607$

∴ Future value = $755.61 ( to the nearest cent)