You deposited $2000 into a college savings account 5 years ago. if the account pays 2.5% annual interest, compounded quarterly, how do you find the current balance of the savings account? please show work thank you ! (=?

1 Answer
Oct 13, 2015

#A = 2265.41#$

Explanation:

This can be solved using compound interest formula

# A = p(1 + r/n)^(nt)#

p = principle interest
r = annual interest
n = number of times interest is compounded per year
t = number of years the amount is deposited or borrowed for
A = Amount after n years including balance

Here,

p = 2000
r = 2.5 / 100 = 0.025
n = 4
t = 5

so,

#A = 2000(1 + 0.025/4)^(4*5)#
#A = 2000( 1.00625)^(20)#
#A = 2000(1.1327)#
#A = 2265.41#$