The Company has a savings plan for its employees. If an employee makes an initial contribution of $500, the company pays 7% interest compounded quarterly.

Question

3. SAVINGS: The Company has a savings plan for its employees. If an employee makes an initial contribution of $500, the company pays 7% interest compounded quarterly.

a. If an employee participating in the plan withdraws the balance of the account after

5 years, how much will be in the account?

b. If an employee participating in the plan withdraws the balance of the account after

35 years, how much will be in the account?

Answer 1

The formula for determining Compound Interest is:
A = P (1 = r/n)^nt
P = principal amount (the initial amount you borrow or deposit)
r = annual rate of interest (as a decimal)
t = number of years the amount is deposited or borrowed for.
A = amount of money accumulated after n years, including interest.
n  = number of times the interest is compounded per year
Using the formula above, then:
P = 500, r = 7/100 = .07, n = 4, t = 5
=500*((1+(0.07/4))^(4*5))
= $ 707.39