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Calculating Future Investment Value with Compound Interest

In this lesson, we explore how to find the future value of an investment of $3,500 at an annual interest rate of 8%, compounded quarterly for one year. We'll utilize the compound interest formula and substitute the values accordingly to determine the final amount in the account. This example illustrates the step-by-step process, including how to identify the number of compounding periods and the importance of rounding to the nearest cent.

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Calculating Future Investment Value with Compound Interest

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  1. 3-3 Example 2 Lesson 3-3 Example 2 Find the value of an investment of $3,500 for 1 year at 8% interest compounded quarterly. Round to the nearest cent. 1.Write the compound interest formula.

  2. 3-3 Example 2 Lesson 3-3 Example 2 Find the value of an investment of $3,500 for 1 year at 8% interest compounded quarterly. Round to the nearest cent. 2.How many times a year is quarterly? 4 n = 4 For how many years? 1 t = 1

  3. 3-3 Example 2 Lesson 3-3 Example 2 Find the value of an investment of $3,500 for 1 year at 8% interest compounded quarterly. Round to the nearest cent. 3.Substitute the principal, rate, number of times per year and number of years into the formula. = 3,500 (1 + 0.02)4(1) = 3,500 (1.02)4(1) = 3,500 (1.02)4 = 3,500 (1.082) = 3,787.00

  4. 3-3 Example 2 Lesson 3-3 Example 2 Find the value of an investment of $3,500 for 1 year at 8% interest compounded quarterly. Round to the nearest cent. 4.How much money is in the account at the end of 1 year? $3,787.00

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