You open a savings account on January 1, 2008 with $1,000. The interest rate stated on this account is 4%, compounded quarterly.

What will your savings account be worth on December 31, 2012 assuming you made no deposits to or withdrawals from the account? Question 8 options:

$1,220.19

$1,216.67

$1,240.41

$1,200.90

FV = $1,220.19

Explanation:

Giving the following information:

You open a savings account on January 1, 2008 with $1,000. The interest rate stated on this account is 4%, compounded quarterly.

Effective rate = 4/4 = 1%

We need to use the following formula:

FV = PV * (1+i) ^n

n = 4*5 = 20

FV = 1000 * (1.01^20) = $1,220.19