Question

Dylan invested $7,200 in an account paying an interest rate of 2. 3% compounded quarterly. Assuming no deposits or withdrawals are made, how much money, to the nearest dollar, would be in the account after 12 years?.

Answer 1

The future value of the investment after 12 years will be $9,481.

What is future value?

The future value of an investment is its value at a future date.  It is obtained by multiplying the present value of an asset by its growth rate raised to the number of periods for the investment.

We can compute the future value of an asset with this model:

FV = PV(1+r)^n

where:

FV = future value

PV = present value

r = annual interest rate

n = number of periods interest held

We can also compute the future value by inputting the variables on an online financial calculator as follows:

Data and Calculations:

Investment amount = $7,200

Compound interest rate = 2.3% quarterly

Period of investment = 12 years

N (# of periods) = 48 (12 x 4)

I/Y (Interest per year) = 2.3%

PV (Present Value) = $7,200

PMT (Periodic Payment) = $0

Results:

FV = $9,481.01

Total Interest $2,281.01

Thus, the future value of the investment after 12 years will be $9,481.

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