Suppose you invest $1,000 today, compounded quarterly, with the annual interest rate of 5.00%. what is your investment worth in one year?

Amount invested today=P = $1,000

Annual interest rate=r = 5%

Concept:

First, find the effective quarterly rate which is r/m, m=no. of quarters in a year which is equal to four.

effective quarterly rate = r/m = 5/4 = 1.25%

now, no. of period is equal to n=4 (reason: 4 quarter in a year for which effective rate of 1.25% used)

Now,

Investment in one year = F = 1,000 (F/P, 1.25%, 4)

= 1,000 (1.0509)

= $1050.9