Question

Your bank account pays a nominal interest rate of 8%, compounded quarterly. You deposit $500 in the account today, and deposit $1,000 in the account at the end of the first year. How much will you have in the account at the end of the first year?

Answer 1

$FV=PV (1+r)^n$

PV=$500

R=8%

N=1

$\therefore FV=\$500(1+0.08)^1$

$FV=\$540$

The total amount in the account at the end of the year is:

$540+$1000=$1540