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Loretta deposits $350 every quarter into a savings account that earns 4. 5% interest compounded quarterly. What is the balance after 7 years?.

Sagot :

Loretta deposited $350 in a savings account with the 4.5% interest compounded quarterly. The amount at the end of 7 years will be $ 478.75.

Given,

Principal (P) = $350

Number of years (t) = 7

Interest rate (r) = 4.5 % or 0.045

We know that, compounded quarterly means interest is calculated four times in an year. The interest for 7 years will be 4 times the number of years. Here,

the number of compounding per year (n) = 4

so, for 7 years = 4*7 = 28

We know that compound interest is calculated as:

A = P{1+(r/n)}^nt

A= 350 {1+(0.045 /4)}^(4)(7)

A= 350 (1+0.01125)^28

A= 350 (1.01125)^28

A= 478.748 or 478.75

The interest (I) for will be ,

I = A-P = 478.75-350= $128.75

So, we can say that, when Loretta deposits $350 at 4.5% interest compounded quarterly, the amount at the end of 7 years will be $ 478.75.

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