Problema Solution
Stan’s savings account has a balance of $2257. After 5 years, what will the amount of interest be at 10% compounded quarterly?
Answer provided by our tutors
P = $2257 the principal
t = 5 years
r = 0.10 or 10% annual rate
m = 4 compounding period per year
i = 0.10/4 = 0.025 interest rate per period
n = 5*4 = 20 total number of compounding periods
A = future value
A = P(1 + i)^n
A = 2257(1 + 0.025)^20
by calculating we find
A = $3,698.36
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the interest is I = A - P
I = 3,698.36 - 2,257
I = $1,441.36
after 5 the interest will be $1,441.36.