Compound Interest Algebra 1

Question

You invest $300 in an account that has a annual interest rate of 6%, compounded quarterly for four years. How much money would you have after the four years? Round to the nearest cent.

Answer 1

Money in the account in “y” years:

M = $300(1 + 0.06/4)^4y

M - money in the account

y - the number of full years

Calculating money in the account after 4 years:

M = $300(1 + 0.06/4)^4•4 = $380.70

Answer 2

You will need to use the formula:

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

A=amount

P=Principal

r=interest rate as a decimal

n=number of times compounded in a year (since quarterly, we use 4)

t=year

Plug in given info:

A=300(1+.06/4)^(4x4)

Calculate: 380.70