Why An Emergency Fund Is Important. People who've had large and unforeseen expenses arise can probably either tell you how happy they were that they hademergency funds, or how difficult it was to find the money to cover expenses.

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3 years ago

Winnie Bracken opened a savings account at Dallas Trust Bank on March 1. It pays 4% interest compounded quarterly. She opened he

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The compounded interest is applied to the amount in the account at end

of a period specified in the rate of compounding.

The amount in the account at the end of 6 quarters is approximately $16,767.2

Reasons:

The interest paid on the account = 4% compounding

Amount with which she opened the account = $10,000

Amount she makes as deposit at the end of each quarter = $1,000

Therefore;

The interest per quarter = 4% ÷ 4 = 1%

Amount in the account after the end first quarter, A₁, is therefore;

A₁ = 10,000 × 0.01 + 10,000 + 1,000 = 11,100

The amount in the second quarter, A₂, is given as follows;

A₂ = 11,100 × 0.01 + 11,100 + 1,000 = 12211

A₃ = 12211 × 0.01 + 12211 + 1,000 = 13333.11

A₄ = 13333.11 × 0.01 + 13333.11 + 1,000 = 14466.4411

A₅ = 14466.4411 × 0.01 + 14466.4411 + 1,000 = 15611.105511

At the end of the 6th quarter, we have;

A₆ = 15611.105511 × 0.01 + 15611.105511 + 1,000 = 16767.2165991

The amount in the account at the end of 6 quarters, A₆ ≈ $16,767.2

Learn more about compounding interest rate here:

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2 years ago

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