I Need help with this

Question

Compound Interest: If $4,000 is invested in a savings account that pays 8% compounded quarterly, how much is in the account at the end of a year?

Answer 1

Since interest is compounded quarterly, we can use the following formula to solve:

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

A = final amount

P = principal or starting amount

r = interest rate

n = number of times compounded yearly (n = 4 for quarterly)

t = total number of years

We can now plug in variables and solve:

A = 4,000(1 + 0.08/4)^4*1

A = 4,000(1.02)⁴

A = 4,000(1.0824)

A = $4,329.73

Answer 2

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 = 4000(1 + 0.08/4)^(4*1)

A = 4000(1.02)^4

A = 4329.73

meaning that at the end of one year the account will have $4,329.73