What is the future value of the 10% savings from earnings of $36,000 if it earns 6.25% annual interest, compounded quarterly for 15 years?
Use the compound interest formula to estimate the future value.
A
=
P
(
1
+
r
n
)
n
t
A.
$912.65
B.
$9,126.53
C.
$1,825.31
D.
$18,253.31
The initial amount saved each year is 0.1($36,000) = $3,600.
The annual interest rate is 6.25%, or 0.0625. Since it is compounded quarterly, the quarterly interest rate is 0.0625/4 = 0.015625.
The number of quarters in 15 years is 15 x 4 = 60.
Using the compound interest formula, we get:
A = $3,600[(1 + 0.015625)^60] = $9,126.53 (rounded to the nearest cent)
Therefore, the future value of the 10% savings from earnings of $36,000 earning 6.25% annual interest, compounded quarterly for 15 years, is $9,126.53.
The answer is B. $9,126.53
S
e
e
h
o
w
a
n
n
o
y
i
n
g
v
e
r
t
i
c
a
l
t
e
x
t
i
s
?