If I got an income tax refund of $650 and invest the money in an account that pays 8% interest, compounded quarterly, how much will I have at the end of 10 years?
Amount = 650(1.02)^40
= ... use your calculator, mine is not handy at the moment
To calculate the future value of your investment, you can use the formula for compound interest:
FV = PV * (1 + r/n)^(n*t)
Where:
FV = Future Value
PV = Present Value (initial investment)
r = Annual interest rate (in decimal form)
n = Number of times interest is compounded per year
t = Number of years
In this case:
PV = $650
r = 8% = 0.08 (in decimal form)
n = 4 (compounded quarterly)
t = 10 years
Plugging these values into the formula:
FV = $650 * (1 + 0.08/4)^(4*10)
Now, let's solve it step by step:
Step 1: Calculate the interest rate per compounding period (quarter):
0.08/4 = 0.02
Step 2: Calculate the total compounding periods:
4 * 10 = 40
Step 3: Calculate the future value:
FV = $650 * (1 + 0.02)^40
Using a calculator or spreadsheet, you can calculate the final amount:
FV = $650 * (1.02)^40 = $1,364.17 (rounded to two decimal places)
Therefore, at the end of 10 years, your investment, including compound interest, will amount to approximately $1,364.17.