Question

A deposit of $1000 is made in an account that earns 8% interest compounded quarterly. The balance in the account after n quarters is given by the following sequence. Find the balance in the account after ten years.
a
=100.000)
n=1,2,3
The balance after ten years.

Answer 1

The balance after ten years is $2,208.04.

When an amount of money is compounded quarterly, it means that the amount deposited and the interest earns interest every quarter. The formula that can be used to determine the balance in 10 years is:

FV = P (1 + r)^nm

• FV = Future value  
• P = Present value = $1000
• R = interest rate = 8%/4 = 2%
• m = number of compounding = 4  
• N = number of years = 10

$1000 x (1.02)^40 = $2,208.04

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