Question

If you invest $3,130.35 in an account earning an annual interest rate of 2.33% compounded quarterly, how much will be in your account after 2 years? After 11 years?

Answer 1

Future value after 2 years:

Here we will use the following formula:

FV = PV * (1 + r%)ⁿ

where, FV = Future value, PV = Present value = $3130.35, r = rate of interest = 2.33% compounded quarterly, so quarterly rate = 2.33% / 4 = 0.5825%, n= time period = 2* 4 = 8 quarters

now, putting theses values in the above equation, we get,

FV = $3130.35 * (1 + 0.5825%)⁸

FV = $3130.35 * (1 + 0.005825)⁸

FV = $3130.35 * (1.005825)⁸

FV = $3130.35 * 1.04756120664

FV = $3279.23

So, after 2 years, the amount will be $3279.23.

Future value after 11 years:

FV = Future value, PV = Present value = $3130.35, r = rate of interest = 2.33% compounded quarterly, so quarterly rate = 2.33% / 4 = 0.5825%, n= time period = 11* 4 = 44 quarters

now, putting theses values in the above equation, we get,

FV = $3130.35 * (1 + 0.5825%)⁴⁴

FV = $3130.35 * (1 + 0.005825)⁴⁴

FV = $3130.35 * (1.005825)⁴⁴

FV = $3130.35 * 1.29117984958

FV = $4041.84

So, after 2 years, the amount will be $4041.84.