You just deposited $3,500 in a bank account that pays a 4.0% nominal interest rate, compounded...

You just deposited $3,500 in a bank account that pays a 4.0% nominal interest rate, compounded quarterly. If you also add another $5,000 to the account one year (4 quarters) from now and another $7,500 to the account two years (8 quarters) from now, how much will be in the account three years (12 quarters) from now?

Expert Solution

$3500 will be in the bank for 12 quarters
$5000 will be in the bank for 8 quarters
$7500 will be in the bank for 4 quarters

Quarterly interest rate = 4/4
= 1%

Value of $3500 after 12 quarters = $3500 * (1+1%)^12
= $3500 * 1.01^12
	= $3500 * 1.1268
	= $3943.89

Value of $5000 after 8 quarters = $5000 * 1.01^8
	= $5000 * 1.0829
	= $5414.28

Value of $7500 after 4 quarters = $7500 * 1.01^4
	= $7500 * 1.0406
	= $7804.53

Total amount in the account after 12 quarters = $3943.89+$5414.28+$7804.53
	= $17162.70

jeff jeffy answered 1 year ago

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