A bank pays 6% interest per year, compounded quarterly. How much will $100 grow to after two years?
A) $112.36
B) $112.55
C) $112.65
D) $112.75

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 (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 = $100, r = 6% or 0.06, n = 4 (since interest is compounded quarterly), and t = 2 years. Plugging these values into the formula gives A = 100(1 + 0.06/4)^(4*2) = 100(1.015)^8 ≈ $112.65.

A Bank Pays 6% Interest Per Year, Compounded Quarterly