Question

$100,000 is invested for five years at a quarterly compounded rate of 2.25%. What are the proceeds?

Answer 1

Here we will use the following formula:

FV = PV * (1 + r%)ⁿ

where, FV = Future value, PV = Present value = $100000, r = rate of interest = 2.25% compounded quarterly, so quarterly rate = 2.25% / 4 = 0.5625%, n= time period = 5 * 4 = 20 quarters

now, putting theses values in the above equation, we get,

FV = $100000 * (1 + 0.5625%)²⁰

FV = $100000 * (1 + 0.005625)²⁰

FV = $100000 * (1.005625)²⁰

FV = $100000 * 1.11871955328

FV = $111871.96

So, proceeds will be $111871.96.