Question

Today you decide to invest $10,000 in an investment account that earns 2% every quarter. Five years from today $ ____________ will have accumulated in the account. (Round to the nearest penny.)

Answer 1

Investment = 10,000

Rate of return = 2% per quarter

Time = 5 years

Since we have quarter returns, hence, number of periods = Time * Number of period in one year = 5 * 4 = 20

We will use Future value formula and compound 10,000 20 times to 5 years at a rate of 2% per quarter

FV = PV * (1+ R)^T

FV of 10,000 = 10,000 * (1+2%)²⁰ = 10,000 * 1.4859474 = $ 14,859.47

Hence, the value of 10,000 today will be $ 14,859.47 5 years from now at a rate of 2% per quarter