$500 is deposited at the end of every three months into an account crediting interest at j₂ = 10%.The fund credits simple interest for fractional parts of an interest period.What is the accumulated value of the fund at the end of 3 years?

Question

Quizplus · Accepted Answer

We have quarterly deposits of $500 at a 10% annual interest rate, compounded quarterly. We can use the formula for the future value of an annuity with quarterly compounding:

FV = PMT * [(1 + r/n)^(n*t) - 1] / (r/n)

where PMT is the payment, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years.

Plugging in the values, we get:

FV = $500 * [(1 + 0.10/4)^(4*3) - 1] / (0.10/4)
FV = $6886.94

Therefore, the accumulated value of the fund at the end of 3 years is $6886.94.

The correct answer is D.

$500 Is Deposited at the End of Every Three Months