Gen is interested in seeing how the money grows. Her mom suggests that she take the money in her piggy bank....

Question

Gen is interested in seeing how the money grows. Her mom suggests that she takes the money in her piggy bank and deposits it in a local bank paying 8.5% compounded quarterly. IF she finds $700 in the piggy bank, how much will it grow to in 10 years?

 

 

would i multiply the 8.5% by 4 then use the FV formula? 

Answer 1

Remember that the formula for interest problems is: A = P(1+(i/n))^nt

 

where A = amount

         P = principal (the dollars you start with)

         i = annual interest rate

         n = number of times compounded per year

         t = number of years

 

In this problem P = 700, i = 0.085, n = 4 (quarterly), and t = 10

 

So, the equation becomes  A = 700(1 + (0.085/4))^4*10

 

 

Answer 2

Hello, thank you for taking the time to post your question!

The underlying formula that you want to use here is

FV = PV(1 + r/n)^(nt) for compound interest

If you plug in the values that we know you can solve for the value of FV algebraically!

FV = 700(1 + 0.085/4)^(4 x 10)

FV = 700(1 + 0.02125)^40

FV = 700(2.3189)

FV = 1623.25

So the final amount will grow to be $1,623.25 at the end of the 10 year period

I hope that helps get you moving in the right direction! Feel free to reach out if you have any additional questions beyond that :)

Answer 3

If 8.5% is the APR, annual percentage rate, then the total sum after 10 years will be

S=$700*(1+0.085/4)^4*10=$1,623.23

If it is the interest rate in one quarter, then

S=$700*(1+0.085)^4*10=$18,293.11