Question

5. Find the interest and future value of a deposit of $10,500 at 6% compounded quarterly for nine years. Interest = $Future Value = $

Answer 1

We are asked to determine the future value compounded quaterly. To do that we will use the following formula:

$A=P(1+\frac{r}{4})^{4t}$

Where:

$\begin{gathered} A=\text{ future value} \\ P=\text{ deposit} \\ r=\text{ interest rate in decimal form} \\ t=\text{ time} \end{gathered}$

Now, we plug in the values:

$A=10500(1+\frac{0.06}{4})^{4(9)}$

Now, we solve the operations:

$A=17945.97$

Therefore, the future value is $17945.97.

To determine the interest we subtract the deposint from the future value:

$I=17945.97-10500=7445.97$

Therefore, the interest is $7445.97