Hanson's Pilings is planning to purchase a new dredge pump in 4 years. Billy Hanson, the owner, invests $11,800 in an account that pays 8% interest compounded quarterly. How much will Mr. Hanson have in the account at the end of 4 years?

Question

Quizplus · Accepted Answer

First, we need to determine the total number of compounding periods by multiplying the number of years by the number of quarters in a year:

4 years × 4 quarters/year = 16 quarters

Next, we can use the formula for compound interest:

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

Where: 
A = the future value of the investment 
P = the principal amount invested 
r = the annual interest rate (as a decimal) 
n = the number of times the interest is compounded per year 
t = the number of years

Plugging in our numbers:

A = $11,800(1 + 0.08/4)^(4 × 4) 
A = $11,800(1.02)^16 
A = $16,198.92

Therefore, Mr. Hanson will have $16,198.92 in the account at the end of 4 years, so the best choice is B.

Hanson's Pilings Is Planning to Purchase a New Dredge Pump