I need the answer because I dont understand how to solve the problem

compounding quarterly provides a little bit more interest than annually. I'll show you both results

1)Compounded Annually @6% APR

F(0)=$7700 - initial investment

F(n)=Funds after each year compound where n is the year (1,2,3,4,5)

F(n)=F(0)*(1.06*n)

F(1)=$8162

F(2)=$8651.72

F(3)=$9170.82

F(4)=$9721.07

F(5)=$10304.44

2)Compounded Quarterly @6% APR. The difference here is that every quarter the present value is compounded by 1.5%. Therefore, the annual increase is (1.015^4) giving an annual multiplier of 1.0613636

Therefore to get to year 5, we compound F(0) by (1.015^20) = 1.346855 ----> 4 quarters for 5 years

F(5)=$7600*1.346855 = $10,370.88 (A wee bit more than annually)

Fun Fact: Compounding approaches an exponential (F(0)e^(rt)) function as the compounding interval becomes continuous (r is the decimal % and t is given in years)

e^(.06*5)=1.3498588 <--Compare to quarterly (1.346855)...not much difference huh?

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