To calculate the future value of the principal after 6 years, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the investment
P = the principal amount ($500 in this case)
r = the annual interest rate (4% or 0.04)
n = the number of compounding periods per year (quarterly means 4 compounding periods per year)
t = the number of years the money is invested for (6 in this case)
Plugging in the values:
A = 500(1 + 0.04/4)^(4*6)
A = 500(1 + 0.01)^24
A = 500(1.01)^24
A = 500(1.282037)
A = $641.02
Therefore, the future value of the $500 principal earning 4% compounded quarterly after 6 years would be $641.02.
500 principal earning 4% compounded quarterly, after 6 yr
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