Answer:
16
Step-by-step explanation:
If it is compounded quarterly, that's 4 times a year.
If you do this for 4 years that's 4×4.
That would be 16.
We have been given invest $500 in an account that has a annual interest rate of 5%, compounded quarterly for four years. 16 times will the money be compounded.
If n is the number of times the interested is compounded each year, and 'r' is the rate of compound interest annually, then the final amount after 't' years would be:
[tex]a = p(1 + \dfrac{r}{n})^{nt}[/tex]
We have been given invest $500 in an account that has a annual interest rate of 5%, compounded quarterly for four years.
Since the interest is compounded quarterly so it will be compounded 4 times a year.
Now, 4 x 4 is 16, so it will be compounded 16 times.
Then we have to divide the 5% by four to get how much will be compounded each quarter.
So, (0.05 / 4) = 0.0125, which is 1.25%.
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