Problema Solution
An investment of $6,530 earns interest at the rate of 4% and is compounded quarterly. What is the accumulated value of the investment at the end of 8 years?
Answer provided by our tutors
P = $6,530 the principal
r = 0.04 or 4% annual rate
m = 4 compounding period per year (compounded quarterly)
i = r/4 = 0.04/4 = 0.01 interest rate per period
t = 8 years the time
n = t*m = 8*4 = 32 total number of compounding periods
A = the future value
A = P(1 + i)^n
A = 6530(1 + 0.01)^32
........
........
A = $8,978.36
The accumulated value of the investment at the end of 8 years is $8,978.36.