Question

Find the compound amount$12,500 at 12% compounded quarterly for 5 years

Answer 1

Use the compound interest formula:

$A=P(1+\frac{r}{n})^{nt}$

Where:

A = compound amount

P = $12,500

r = 12% = 0.12

For n, because we are compounding quarterly, we are compounding 4 times per year, so n = 4.

t = 5 years

Therefore, substitute the values:

$A=12500(1+\frac{0.12}{4})^{4\cdot5}$

Solve:

$\begin{gathered} A=12500(1+0.03)^{20} \\ A=12500(1.03)^{20} \\ A=22576.4 \end{gathered}$

Answer:

compound amount will be $22,576.4 in 5 years