SOLUTION: compound interest $500. 5% 10yrs compound quarterly. I know the answer is 821.81 but how. and I know the forumla ia a=p(1+ r/n)^nt help please thank you

Algebra ->  Finance -> SOLUTION: compound interest $500. 5% 10yrs compound quarterly. I know the answer is 821.81 but how. and I know the forumla ia a=p(1+ r/n)^nt help please thank you      Log On


   

Question 131149: compound interest
$500. 5% 10yrs compound quarterly. I know the answer is 821.81 but how. and I know the forumla ia a=p(1+ r/n)^nt help please thank you
Answer by jim_thompson5910(35256) About Me  (Show Source):
You can put this solution on YOUR website!

A=p%281%2Br%2Fn%29%5E%28n%2At%29 Start with the compound interest formula

A=500%281%2B0.05%2F4%29%5E%284%2A10%29 Plug in p=500, r=0.05 (this is the decimal form of 5% interest), n=4, and t=10


A=500%281%2B0.0125%29%5E%284%2A10%29 Divide 0.05 by 4 to get 0.0125


A=500%281%2B0.0125%29%5E%2840%29 Multiply the exponents 4 and 10 to get 40


A=500%281.0125%29%5E%2840%29 Add 1 and 0.0125 to get 1.0125


A=500%281.64361946348701%29 Raise 1.0125 to the 40 th power to get 1.64361946348701


A=821.809731743505 Multiply 500 and 1.64361946348701 to get 821.809731743505

So if you invest $500 at an interest rate of 5%, which is compounded 4 times a year for 10 years, the return is about $821.81 (which is rounded to the nearest cent)