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March 10th, 2014, 11:35 PM   #1
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Eric and his children

Eric deposited $32,000 in a savings account to save for his children's college education. The bank pays 8% tax deferred interest per year compounded quarterly. How much will his account be worth at the end of 18 years?

My attempt:
Here I used the formula: where A = amount, P = principal, r = interest rate and n = number of interest periods

So: . At the end of 18 years Eric's deposit becomes $133,156.49

Am I correct? I am confused about the interest rate. It says 8% per year compounded quarterly. Does this mean the interest is 8%/4 per quarter?

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March 11th, 2014, 09:14 AM   #2
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Re: Eric and his children

Quote:
Originally Posted by shunya
Am I correct? I am confused about the interest rate. It says 8% per year compounded quarterly.
Does this mean the interest is 8%/4 per quarter?
Yes and yes. Good job!
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