Future Value with Quarterly Compounding

Suppose you invest $1,000 in an account that pays an annual interest rate of 5%. The interest is compounded quarterly. How much will your investment be worth at the end of 3 years?

To calculate the future value of the investment, you can use the future value formula:

$$ FV = PV imes (1 + r/n)^{nt} $$

where:

• $$ FV $$ = Future Value
• $$ PV $$ = Present Value = $1,000
• $$ r $$ = annual interest rate = 0.05
• $$ n $$ = number of compounding periods per year = 4 (quarterly)
• $$ t $$ = number of years = 3