Bill invests $1000 for 6 years compounded quarterly at 6% interest. bill's accumulated amount at the end of 6 years will be $1429.50
Compound interest, also known as interest on principal and interest, is the practice of adding interest to the principal amount of a loan or deposit. Theoretically, continuously compounded interest means that interest is continuously earned on an account balance as well as reinvested into the balance to increase future interest earnings.
Every quarter, or four times per year, the interest is compounded. The bank gives 5% interest. You must divide 5 by 100 to obtain your nominal rate of interest, which is 0.05.
[tex]A = P(1 + \frac{r}{n})^{nt}[/tex]
Here, P = $1,000
r = 0.06 (6%)
n = 4 (because compounded quarterly)
t = 6 years
Therefore, the investment's final value:
[tex]A = P(1 + \frac{r}{n})^{nt}[/tex]
A = 1000 * [1 + (0.06 / 4)⁴ˣ⁶
A = 1000 * (4.06)²⁴
Therefore, Amount = $1,429.50
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