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Question
John deposited 10,000toopenanewsavingsaccountthatearned4percentannualinterest,compoundedquarterly.Iftherewerenoothertransactionsintheaccount,whatwastheamountofmoneyinJohn′saccount6$ months after the account was opened?
John deposited 10,000toopenanewsavingsaccountthatearned4percentannualinterest,compoundedquarterly.Iftherewerenoothertransactionsintheaccount,whatwastheamountofmoneyinJohn′saccount6$ months after the account was opened?
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Solution
The correct option is C 10,201$
Since John's account is compounded quarterly, he receives 14 of his annual interest, or 1 %, every 3 months. This is added to the amount already in the account to accrue interest for the next quarter, After 6 months, this process will have occurred twice, so the amount in John's account will then be($10,000)(1.01)(1.01)= 10,000(1.01)^{2} = 10,201The correct answer is D.
Since John's account is compounded quarterly, he receives 14 of his annual interest, or 1 %, every 3 months. This is added to the amount already in the account to accrue interest for the next quarter, After 6 months, this process will have occurred twice, so the amount in John's account will then be
($10,000)(1.01)(1.01)= 10,000(1.01)^{2} = 10,201
The correct answer is D.
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