business math

Question

you deposit $ 1,000 for years at an interest rate  of 2.0% If the interest is compounded quarterly .How much money would you have at the end of the four years ?

Answer 1

the underlying compound interest formula that you want to use here to simplify this one is

A = P(1 + r/n)^(nt)

for this particular scenario that means taking

A = 1000(1 + 0.02/4)^(4*4)

A = 1000 x 1.08307

A = 1083.07

meaning that you would have approximately $1,083.07 in your account at the end of the four years

Answer 2

The formula for this calculation is

Future Value = Present value x (1+r/n)^nt 

Where r= interest rate (in decimal form), and n= number of times per year the interest is compounded.

 

In this case, FV = $1000 x (1 + .02/4)^{4 • 2}

 

Our formula becomes FV = $1000 x (1.005)⁸, which becomes $1000 x 1.0407.

 

So, at the end of 2 years, the value will be $1,040.70