Find the future value, using the future value formula. Round the answer to the nearest cent.
$625 @ 5.5% compounded quarterly for 3 years.
.055/4 = .01375 per quarter
3 * 4 = 12 quarters
625 * 1.01375^12 = 736.29
To find the future value using the future value formula, we need to use the following formula:
FV = PV * (1 + r/n)^(n*t)
Where:
FV = future value
PV = present value (initial amount)
r = interest rate (in decimal form)
n = number of compounding periods per year
t = number of years
Given:
PV = $625
r = 5.5% (or 0.055 as a decimal)
n = 4 (since interest is compounded quarterly)
t = 3 years
Substituting the given values into the formula, we have:
FV = $625 * (1 + 0.055/4)^(4*3)
Now let's solve the equation:
FV = $625 * (1 + 0.01375)^(12)
FV = $625 * (1.01375)^(12)
FV ≈ $625 * 1.454312217
FV ≈ $907.69
Rounding the answer to the nearest cent, the future value is approximately $907.69.