compound interest

Question

$2250 is deposited in an account that pays 6% annual interest, compound quarterly. find the balance after ten years

Answer 1

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

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

for this scenario that means

A = 2250(1 + 0.06/4)^(4*10)

A = 2250(1.015)^40

A = 4081.54

meaning that the final balance here is $4,081.54

Answer 2

P = principal = $2250

r = annual interest rate = 0.06

t = number of years = 10

n = number of times that interest is compounded per year = 4

A = amount in t years

 

A = P(1 + r/n)^nt  = 2250(1 + .06/4)⁴⁰

 

                         = 2250(1.015)⁴⁰ = $4081.54