Question

A company has a bonus incentive for its employees. The company pays employees an initial signing bonus of $1000 and invests that amount for the employees. Suppose the investment earns 8% interest compounded quarterly.
a. If an employee receiving this incentive withdraws the balance of the account after 5 years, how much will be in the account? Round to the nearest cent.
b. If an employee receiving this incentive withdraws the balance of the account after 35 years, how much will be in the account? Round to the nearest cent.

Answer 1

Since this is a compound interest, we will use this formula: A = P(1+r/n)^n*t

P = $1000 --> the amount that we start with

r = 8% --> this is the rate

n = 4 --> This is because it is compounded quarterly.

t = 5 --> the amount of years

A = 1,000.00(1 + 0.02)^(20)

So our final value after inserting those numbers in the equation is: $1,485.95.