Question

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?

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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