An initial investment of $12,000 is invested for 2 years in an account that earns 4% interest, compounded quarterly. Find the amount of money in the account at the end of the period.
A) $994.28
B) $12,865.62
C) $12,994.28
D) $12,979.20

Question

Quizplus · Accepted Answer

The correct calculation for compound interest is A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount ($12,000), r is the annual interest rate (4%, or 0.04), n is the number of times that interest is compounded per year (quarterly, so 4 times), and t is the time the money is invested for (2 years). Plugging in the values: A = 12000(1 + 0.04/4)^(4*2) = $12,994.28.

An Initial Investment of $12,000 Is Invested for 2 Years