Future Value Calculation with Quarterly Compounding

Maria just invested $2,000 in a savings account that offers an annual interest rate of 5%. The interest is compounded quarterly. What will be the balance in her account at the end of 5 years?

To determine this, we need to use the future value of a single sum formula, which is given by:

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

Where:

• $$FV$$ = future value
• $$PV$$ = present value (initial investment)
• $$r$$ = annual interest rate (in decimal)
• $$n$$ = number of compounding periods per year
• $$t$$ = number of years