Question

You deposited $2000 into a college savings account 5 years ago. if the account pays 2.5% annual interest, compounded quarterly, how do you find the current balance of the savings account? please show work thank you ! (=?

Answer 1

`A = 2265.41`$

Explanation:

This can be solved using compound interest formula

`A = p(1 + r/n)^(nt)`

p = principle interest
r = annual interest
n = number of times interest is compounded per year
t = number of years the amount is deposited or borrowed for
A = Amount after n years including balance

Here,

p = 2000
r = 2.5 / 100 = 0.025
n = 4
t = 5

so,

`A = 2000(1 + 0.025/4)^(4*5)`
`A = 2000( 1.00625)^(20)`
`A = 2000(1.1327)`
`A = 2265.41`$