I need the balance of $2,500 principal earnings with 4% compounded quarterly, after 4 years the balance is?

Question

answers are:   a) $2,931.45    b) $2,924.65     c) $41,600.00     d) $40,000.00

Answer 1

The formula is:

 

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

 

Where:

A = the ending balance

P = the principle or initial balance = $2500

r = annual interest rate expressed as a decimal value = 4% = 0.04

n = number of compoundings per year = quarterly = 4

 

A = ($2500)(1 + 0.04/4)^4*4

 

A = ($2500)(1.01)¹⁶

 

Can you finish it from here?

Answer 2

The formula for discrete compounding (non-continuous) is given by:

 

A = P*(1+ r/n)^n*t,

 

where P:  Principle amount

    r:  rate 

    n:  times per year you compound

    t:  number of years

 

Therefore, plugging in the info from the problem you stated, we have:

 

A = (2500)*(1+.04/4)^4*4

   = 2931.45