Joe and Susan invested $1500 at Bank of America in 2000, at 4% compounded quarterly. In the year 2005 they moved to another city and took the total money from their investment added $500 and invested in at Bank Bravo, at 5% compounded quarterly.

Question

Joe and Susan invested $1500 at Bank of America in 2000, at 4% compounded quarterly. In the year 2005 they moved to another city and took the total money from their investment added $500 and invested in at Bank Bravo, at 5% compounded quarterly.
a) What is the value of this account now in 2010? Show all steps arriving to your answer. 
b) What is the total amount of compound interest earned?

Henry · Answer

P = Po * (1+r)^n r = (4%/4)/100% = 0.01 = Quarterly % rate expressed as a decimal. n = 4Comp./yr. * 5yrs. = 20 Compounding periods. Solve for P. 2nd investment = P + $500 @ 5% for 5 yrs.