Question

# The local credit union offers an interest rate of 6%, compounded quarterly. How long (number of...

The local credit union offers an interest rate of 6%, compounded quarterly. How long (number of quarters) will it take Lisa to earn \$200 worth of interest on her initial deposit of \$500?

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Answer #1

In this Question following is given

Interest rate per annum 6% compounded quarterly

Principle amount (Initial Deposit)- \$500

Interest to be earned - \$200

Time( in quarters ) - we have to calculate

Formula for interest compounded quarterly is A = P(1 + r/n)nt

Where A = interest earned + Principle

P= Principle

r = rate of interest

n= number of compounding period per year

t = time involved in year'

So in the present case

we will do as follows -

200= 500(1+ 0.06/4)4t

t= 5.65 year approx

In quarters= 5.65*4= 22.6 qaurters approx

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