Multiple compounding periods (FV): Carlyn Botti wants to invest $3,500 today in a money market fund that pays quarterly interest at 5.5 percent. She plans to fund a scholarship with the proceeds at her alma mater, Towson University. How much will Carlyn have at the end of seven years? (Round to the nearest dollar.)

Question

Quizplus · Accepted Answer

We can use the formula for future value with multiple compounding periods: FV = PV x (1 + r/n)^(n*t), where PV = 3,500, r = 0.055, n = 4 (since interest is compounded quarterly), and t = 7 years. Plugging in these values, we get FV = 3,500 x (1 + 0.055/4)^(4*7) = $5,130. Therefore, the best choice is C.

Multiple Compounding Periods (FV): Carlyn Botti Wants to Invest $3,500