Solve.
-Domenica invests $250 each quarter in a fixed-interest mutual fund paying annual interest of 7%compounded quarterly. How much will her account have in it at the end of 11 years?
A)$16,363
B)$3,946
C)$49,343
D)$16,492

Question

Quizplus · Accepted Answer

The investment scenario described is a case of a future value of a series in compound interest. The formula to calculate the future value of a series is $FV = P \times \frac{(1 + r)^n - 1}{r}$, where $P$ is the payment per period, $r$ is the interest rate per period, and $n$ is the total number of payments. Given an annual interest rate of 7% compounded quarterly, the quarterly interest rate is $7\% / 4 = 1.75\%$, or $0.0175$ in decimal form. Domenica invests $250 each quarter for 11 years, which equals $11 \times 4 = 44$ quarters. Plugging these values into the formula gives $FV = 250 \times \frac{(1 + 0.0175)^{44} - 1}{0.0175}$, which calculates to approximately $16,363.

Solve. -Domenica Invests $250 Each Quarter in a Fixed-Interest Mutual Fund