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6 May, 17:09

You just deposited $2,500 in a bank account that pays a 4.0% nominal interest rate, compounded quarterly. If you also add another $5,000 to the account one year (4 quarters) from now and another $7,500 to the account two years (8 quarters) from now, how much will be in the account three years (12 quarters) from now

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  1. 6 May, 17:32
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    The value of the investment would be $16,035.87 in 12 quarters from now

    Explanation:

    The value of $2,500 after four quarters can be determined with the below formula:

    FV=PV * (1+r/t) ^N*t

    FV is the future value of the investment, the unknown

    PV, the present value of the investment is the amount invested.

    r is the rate of return of 4%

    t is the number of times interest is paid annually, 4 times in this case

    After the first four quarters, the worth of the investment is shown thus:

    FV=$2500 * (1+4%/4) ^1*4

    FV=$2500 * (1+1%) ^4

    FV=$2,601.51

    After that $5000 was added to $2,601.51 making $7,601.51 which was reinvested to yield the below:

    FV=$7,601.51 * (1 + in 4%/4) ^1*4

    FV=$7,601.51 * (1+1%) ^4

    FV=$7910.16

    Then $7,500 was added to $7,910.16 which turns $15,410.16

    FV=$15,410.16 * (1+4%/4) ^1*4

    FV=$15,410.16 * (1+1%) ^4

    FV=$16,035.87
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