Jill Clinton puts $1,000 in a savings passbook that pays 4% compounded quarterly. How much will she have in her account after five years?

Question

Quizplus · Accepted Answer

We can use the formula for compound interest:

A = P(1 + r/n)^(nt)

Where:

A = the amount after t years
P = the principal amount (initial investment)
r = annual interest rate (as a decimal)
n = number of times the interest is compounded per year
t = the number of years

In this case: 
P = $1,000
r = 4% or 0.04
n = 4 (since interest is compounded quarterly)
t = 5

Plugging in the values, we get: 
A = $1,000(1 + 0.04/4)^(4*5)
A ≈ $1,220.20

Therefore, Jill will have $1,220.20 in her account after five years. The correct answer is B.

Jill Clinton Puts $1,000 in a Savings Passbook That Pays