Question

The basic equation for calculating compound interest is A = P(1 + nt.
If $1,200 is invested at an interest rate of 8% per year, compounded quarterly, how much will the
investment be worth at the end of 10 years?
Show your work!

Answer 1

The amount of the investment at the end of the 10 years period if compounded quarterly is $2,649.6.

Compound interest

• Principal, P = $1200
• Interest rate, r = 8% = 0.08
• Time, t = 10
• Number of period, n = 4

A = P(1 + r/n)^nt

= 1200(1 + 0.08/4)^(4×10)

= 1200(1 + 0.02)^40

= 1200(1.02)^40

= 1200(2.208)

= $2,649.6

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