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21 October, 05:06

When their child was born, Elaine and Mike Porter deposited $5,000 in a savings account at Tennessee Trust. The money earns interest at 6% compounded quarterly. Considering that they make no other deposits or withdrawals, how much will the account be worth in two years

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  1. 21 October, 06:16
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    Amount in compound interest = p (1 + r/t) ^nt where p is the initial deposit, r = rate, t = number of compunding in a period and n = period.

    Here, Amount after 2 years = 5,000 (1 + (6/100) / 4) ^ (2 x 4) = 5,000 (1 + 0.06/4) ^8 = 5,000 (1 + 0.015) ^8 = 5,000 (1.015) ^8 = 5,000 (1.126493) = $5,632.46
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