Question

You deposit $500 into an account that earns a 5% interest rate that compounds quarterly. You leave the money in the account for 1 year. How much money will you have in the account after 1 year?

Answer 1

To calculate the amount of money in the account after 1 year, we can use the following formula:

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

Where:

• A = the amount of money in the account after 1 year
• P = the principal amount deposited ($500)
• r = the interest rate (5%)
• n = the number of times interest is compounded per year (4)
• t = the number of years (1)

Plugging in the given values, we get:

A = 500(1 + 0.05/4)^4*1

A = 500(1.0125)^4

A = $515.63

Therefore, after 1 year, the account will have $515.63.