You deposit $3,500 into a savings account paying 3% compounded quarterly. Two years later you withdraw $800. How much money was in the account after 6 years?

Question

 This uses compound interest

Answer 1

At the 2 years point of compounding, you'd have had 3500(1.0075⁾⁸; call this M.

 

After withdrawal of $800, you'd then have M-800.

 

Now apply the compounding to the next FOUR years (16 quarters); the new amount would be

(M-800)(1.0075¹⁶).

 

The key formula in use is A = P(1+r/n)^nt where n = 4 (compoundings per year), t=# of years, r = interest rate (3% = 0.03).  Note r/4 = 0.03/4 = 0.0075.