Question

If $4,000 is deposited into an investment account yielding 10% every 3 months starting on 1/1/2018, what amount will be available in the investment account in 4 years.

Answer 1

The formula for compound interest

Final Amount = P ( 1+ r/n) ^ nt

Where P = Principal amount = $4000

r/n = Rate of interest every quarter = 10% every 3 months = 10/100 = 0.1

t = Time period the amount remain invested.= 4 years

n= number of times interest is compounded = quarterly compounding = 4

Then , Final amount = 4000 ( 1+ 0.1) ^ (4x4)

= 4000 ( 1.1) ^ 16

= 4000 ( 4.5950)

= $18380

Amount that will be available in the investment account in 4 years.

= $18380