Use the compound interest formula for compounding more than once a year to determine the accumulated balance afterthe stated period.
-$1200 deposit at an APR of 2% with quarterly compounding for 2 years

Question

Quizplus · Accepted Answer

The compound interest formula for compounding more than once a year 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 (the initial amount of money), r is the annual interest rate (decimal), n is the number of times that interest is compounded per year, and t is the time the money is invested for in years. For this problem, P = $1200, r = 0.02 (2% as a decimal), n = 4 (quarterly compounding), and t = 2 years. Plugging these values into the formula gives A = 1200(1 + 0.02/4)^(4*2) = $1248.85.

Use the Compound Interest Formula for Compounding More Than Once