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Question 850269: For a seven year period, Mike deposited $600 each quarter into an account paying 4.8%
annual interest compounded quarterly. (Round your answers to the nearest cent.)
(a) How much money was in the account at the end of 7 years? Show work.
(b) How much interest was earned during the 7 year period?
Answer by harpazo(655)   (Show Source):
You can put this solution on YOUR website!
Formula:
P is the principal (the initial amount you borrow or deposit)
r is the annual rate of interest (percentage)
n is the number of years the amount is deposited or borrowed for.
A is the amount of money accumulated after n years, including interest.
When the interest is compounded once a year:
A = P(1 + r)^
n
However, if you borrow for 5 years the formula will look like:
A = P(1 + r)5
This formula applies to both money invested and money borrowed.
Frequent Compounding of Interest:
What if interest is paid more frequently?
Here are a few examples of the formula:
Annually = P × (1 + r) = (annual compounding)
Quarterly = P (1 + r/4)4 = (quarterly compounding)
Monthly = P (1 + r/12)12 = (monthly compounding)
Use the formula Quarterly = P (1 + r/4)4 = (quarterly compounding) to find how much money in the account after 7 years.
To find how much interest after 7 years, use I = prt.
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