Question

Winnie Bracken opened a savings account at Dallas Trust Bank on March 1. It pays 4% interest compounded quarterly. She opened her account with initial deposit of $10,000. She made $1,000 deposits at the end of each quarter. How much is in the account at the end of 6 quarters?

Answer 1

The answer is 16,240

I just timed 4% to 1 thousand which got me 40. I added 40 to a thousand. Then timed 1040 to 6 which got me 6240. I added 6240 to 10 thousand to get 16,240.

Answer 2

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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