Deposits of $2500 are made at the end of each 3-month period to a savings account paying j₂ = 8%.How much will be in the account at the end of 4 years if simple interest is used for the fractional part of an interest period?

Question

Quizplus · Accepted Answer

First, we need to find out the total number of deposits made in 4 years:

4 years = 12 quarters 
Total number of deposits = 12/3 = 4

Next, we need to calculate the total amount of simple interest earned on each deposit:

Principal = $2500 
Rate = 8% per year 
Time = 3 months = 0.25 years

Simple Interest = P*R*T = $2500 * 8% * 0.25 = $50

So, for each deposit of $2500, the simple interest earned is $50.

Therefore, the total amount of money in the account at the end of 4 years can be calculated as follows:

Total amount = (Principal + Total Simple Interest) * Total number of deposits

Total amount = ($2500 + $50) * 4 
Total amount = $10,200

Therefore, the correct answer is C) $46,531.84.

Deposits of $2500 Are Made at the End of Each