Mark Welsch deposits $7,200 in an account that earns interest at an annual rate of 4%, compounded quarterly. The $7,200 plus earned interest must remain in the account 3 years before it can be withdrawn. How much money will be in the account at the end of 3 years

$8,113.14

Explanation:

The computation of the amount  will be in the account at the end of 3 years i.e future value is shown below:

As we know that

Future value = Present value × (1 + interest rate)^number of years

= $7,200 × (1 + 0.04 ÷ 4)^ 3 × 4 quarters

= $7,200 × (1.01)^12

= $7,200 × 1.12682503

= $8,113.14

Since it is compounded quarterly so we divided the rate by 4 quarters and multiplied the number of years with the 4 quarters as there are 4 quarters in a year

Future Account Value = $ 161,327.31

Explanation:

Investment Amount (PV)

The starting amount you invest in the account or your current balance in an existing investment account

Future Account Value (FV)

The return amount you want to attain. Your target amount.

Number of Years (n)

Several years you will invest.

Interest Rate (R)

The annual interest rate you expect on your invested money

Compounding (m)

The periodic compounding of your investment account

Contributions (PMT)

The payment amount you will contribute to your investment account periodically

Frequency of Contributions (q)

The periodic timing of your contributions