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Question 177231This question is from textbook college algebras
: Ok I am still struggling with what I am doing wrong. The problem is $8000 for 10 years at 10.5% compounded quarterly. This is how I set it up and worked it. Please tell me what I am doing wrong or out of order.
8000(1+.105/4)^4(10)
8000(1.02)^40
17664.31$
I first divided .105/4
and have tried both mulitplying this by 8000 and then by the power and vice versa. The answer is 22553.65$ I appreciate your help.
This question is from textbook college algebras
Answer by gonzo(654)   (Show Source):
You can put this solution on YOUR website! 10.5% compounded quarterly is 10.5% / 4 each quarter = 2.625% each quarter.
to get the rate, you divide the % by 100% to get .02625 interest rate each quarter.
you will be multiplying by 1 + this, so you will be multiplying by 1.02625 each quarter.
number of years is 10
number of time periods is 4 * 10 = 40
so you are going to multiply $8,000 * (1.02625)^40 = $22,536.64769
in general, the rule is:
interest rate per period is annual interest rate divided by number of periods per year.
number of time periods is number of years times number of time periods per year.
looks like your problem is you rounded before getting to the end.
.105/4 = .02625
you just took .02
never round in the middle of a calculation.
only at the end.
the answer of $22,536.64769 rounds to $22,536.65
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