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You have savings of $100. You plan to save another $100 at the beginning of each year for 5 years. The account pays annual interest of 8 percent, compounded quarterly. The ending balance (principal plus interest) will be $ at the end of 5 years.

Respuesta :

Answer: The ending balance (principal plus interest) will be $638.10

Explanation:

To calculate this we need to use the Quarterly Interest formula

CI quarterly = P (1+ (R/4)/100)^4n

CI is the compound interest payable

I is the initial principal sum of money

R is the interest rate in percentage at which interest accrued over time

n is the time period in years

For the first year the total amount plus interests is

CI = $ 100 (1 + (8/4)/100)^4x1

CI = $100 (1 + 2/100)^4

CI= $100 (1 + 0.02)^4  

CI = $100* 1.0824

CI = $108.24

For the second year = $100+ $108.24= $208.24

CI = $ 208.24 * 1.0824

CI = $225.41

For the third year = $100 + $ 225.41 = $325.41

CI = $325.41 * 1.0824

CI = $352.23

For the fourth year = $100 + $ $352.23 = $452.23

CI  = $452.23 * 1.0824

CI = $ 489.51

For the fifth year =  $100+ $489.51 = $589.51

CI = $589.51 * 1.0824

CI = $ 638.10

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