If $500 is invested at an interest rate of 3.75% per year, compounded quarterly,

Algebra
Tutor: None Selected Time limit: 1 Day

If $500 is invested at an interest rate of 3.75% per year, compounded quarterly, find the value of the investment after the given number of years. (Round your answers to the nearest cent.)
(a) 1 year
 

(b) 2 years
 

(c) 8 years

Jul 17th, 2015

Thank you for the opportunity to help you with your question!

FV = PV(1 + (i/n) )^(n*t)

Part a

PV = $500   ;    i = 3.75% = 0.0375    ;   n = 4 (since it is compounded quarterly)    ;   t = 1 year

FV = (500)(1 + (0.0375/4) )^(4*1) = (500)(1 + 0.009375)^4 = (500)(1.009375)^4 = 519.01532

FV = $519.02

Part b

t = 2 years

FV = (500)(1 + (0.0375/4) )^(4*2) = (500)(1 + 0.009375)^8 = (500)(1.009375)^8 = 538.7538

FV = $538.75

Part c

t = 8 years

FV = (500)(1 + (0.0375/4) )^(4*8) = (500)(1 + 0.009375)^32 = (500)(1.009375)^32 = 673.98683

FV = $673.99

Please let me know if you need any clarification. I'm always happy to answer your questions.
Jul 17th, 2015

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