Which of the following formulae represents the future value of $500 invested at 8% compounded quarterly for five years?
A)500(1 + .08)5
B)500(1 + .08)20
C)500(1 + .02)5
D)500(1 + .02)20

Question

Quizplus · Accepted Answer

The correct formula for the future value of an investment compounded quarterly is $ P(1 + \frac{r}{n})^{nt} $, where $ P $ is the principal amount ($500), $ r $ is the annual interest rate (0.08), $ n $ is the number of times the interest is compounded per year (4, since it's quarterly), and $ t $ is the time the money is invested for in years (5). Substituting these values gives $ 500(1 + \frac{0.08}{4})^{4*5} = 500(1 + 0.02)^{20} $.

Which of the Following Formulae Represents the Future Value of $500