Problema Solution

Find the compound amount for $50,000 at 12% compounded quarterly for 5 years.

Answer provided by our tutors

P = $50,000 million the principal

r = 0.12 or 12% annual rate

m = 4 compounding period per year (compounded quarterly)

i = 0.12/4 = 0.03 interest rate per period

t = 5 years is the time in years

n = t*m = 5*4 = 20 is the total number of compounding periods

A = the future value

The formula for the future value is:

A = P(1 + i)^n

A = 50000(1 + 0.03)^20

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A = $90,305.56

At the end of 5 years the compound amount will be $90,305.56.