Find the future value, using the future value formula and a calculator. (Round your answer to the nearest cent.)$809 at 5.5% compounded quarterly for 6 years

Question

 Find the future value, using the future value formula and a calculator. (Round your answer to the nearest cent.)$809 at 5.5% compounded quarterly for 6 years 

Answer 1

Donna,

 

We can use the formula

 

  FV = PV * (1+i/n)^(n*y)

 

where FV is the unknown future value, PV is the present value (809), i is the annual interest rate (as a decimal value, so 5.5% is 0.055), n is number of interest payments per year ("quarterly" means n=4), and y is the number of years (6). If we insert these values, we have

 

  FV = 809 * (1 + 0.055 / 4) ^ (4 * 6)

 

So

 

  FV = 809 * (1 + 0.01375) ^ 24 = 809 * (1.01375) ^ 24

 

On my calculator, I get FV = $1122.766. Rounding to the nearest cent, we get $1122.77

 

That's pretty cool -- in 6 years, our money would grow from $809 to just over $1122!