SOLUTION: I am an eight grader, I don't understand how to do this? Can you please provide a step by step solution, so I learn how to do it the next time. Principal 5000; rate 4 1/2%;

Question 116676: I am an eight grader, I don't understand how to do this?
Can you please provide a step by step solution, so I learn how to do it the next time.

Principal 5000; rate 4 1/2%; quarterly compounded; time 10 years
Thanks
Found 2 solutions by checkley71, solver91311:
Answer by checkley71(8403) (Show Source): You can put this solution on YOUR website!
P(1+R/N)^Y*N WHERE R=ANNUAL RATE, N=NUMBER OF PERIODS PER YEAR, T=NUMBER OF YEARS.
5000(1+.045/4)^10*4
5000(1+.01125)^40
5000(1.01125)^40
5000*1.56=$7,821.88 ANSWER.

Answer by solver91311(24713) (Show Source): You can put this solution on YOUR website!
I'm not sure what value you are looking to calculate. Do you want the Future Value of the investment (Principal plus interest earned), or just the interest earned?
To obtain the Future Value, FV:
, where P is the principal, r is the annual interest rate, n is the number of times per year the interest is added, and Y is the number of total years for the investment.

So for your problem,

. Ok, where did the 4 come from? That's because quarterly means 4 times per year.

The arithmetic here requires either many hours of work, or a good calculator. There are several compound interest calculators on the web, or you can use Excel if you have it. If you type =5000*(1+(0.045/4))^(10*4) into a cell in a spreadsheet, you'll get the answer. I got $7,821.88.

If you need to know the amount of the interest, just subtract $5,000 from the answer above.

Hope that helps,
John

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