Question
Assume that a one-year CD purchased for $2000 pays an APR of 4% that is compounded quarterly. How much is in the account at the end of each compounding period? (Calculate the interest and compound it each period rather than using the compound interest formula. Round your answers to the nearest cent.)
Answers
4% that is compounded quarterly ---> 1% each quarter year
at end of 1st quarter --- 2000(1.01) = 2020
at end of 2nd quarter -- 2020(1.01) = 2040.20
at end of 3rd quarter -- 2040.20(1.01) = 2060.60
at end of 4th quarter -- 2060.60(1.01) = $2081.21
of course the logical way would be to do 2000(1.01)^4 = 2081.21
at end of 1st quarter --- 2000(1.01) = 2020
at end of 2nd quarter -- 2020(1.01) = 2040.20
at end of 3rd quarter -- 2040.20(1.01) = 2060.60
at end of 4th quarter -- 2060.60(1.01) = $2081.21
of course the logical way would be to do 2000(1.01)^4 = 2081.21
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