If you deposit $1,000 in an account that compounds quarterly at 8 percent interest, the amount of your account at the end of 5 years will be
A) $1,104.10.
B) $1,485.90.
C) $1,469.30.
D) $4,661.00.

Question

Quizplus · Accepted Answer

The formula for compound interest is A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount ($1,000), r is the annual interest rate (8%, or 0.08), n is the number of times that interest is compounded per year (quarterly, so 4 times), and t is the time the money is invested for in years (5 years). Plugging these values into the formula gives A = 1000(1 + 0.08/4)^(4*5) = $1,485.90.

If You Deposit $1,000 in an Account That Compounds Quarterly