What principal earning 16% compounded quarterly will grow to $8500 after six years and three months?
A) $448.66
B) $22,659.61
C) $3188.49
D) $3361.68
E) $3147.71

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, 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. Here, A = $8500, r = 16% or 0.16, n = 4 (since the interest is compounded quarterly), and t = 6.25 years (6 years and 3 months). Rearranging the formula to solve for P gives P = A / (1 + r/n)^(nt). Substituting the given values and solving for P gives P ≈ $3188.49.

What Principal Earning 16% Compounded Quarterly Will Grow to $8500