Kristin opens a savings account with $3500. She deposits $2400 every year into the account that has a 0.65% interest rate, compounded quarterly. If she doesn't withdraw any money, what will the account balance be in 10 years?
1. $28551.51
2. $24776.39
3. $28511.25
4. $24816.65
I don't know what formula to use or how to solve.
To find the account balance for this question you have to use the formula of a compound interest and the formula of the future value of an annuity ordinary.
The formula of a compound interest is A=p (1+r/k)^kt A future value? P present value 3500 R interest rate 0.0065 K compounded quarterly 4 T time 10 years
Also the formula of the future value of an annuity ordinary is Fv=pmt [(1+r/k)^(kt)-1)÷(r/k)] Fv future value? PMT since the payment per year is 2400 so you should find the payment per quarter which is 600 (2400÷4) because the interest is quarterly. R interest rate 0.0065 K compounded quarterly 4 T time 10 years
The sum of those two formulas is the answer. The balance is 3,500×(1+0.0065÷4)^(4×10) +600×(((1+0.0065÷4)^(4 ×10)−1)÷(0.0065÷4)) =28,511.25.....answer
