Compound Interest
The Future Value of investment on compound interest can be calculated with the formula:
[tex]FV=PV(1+i)^n[/tex]Where PV is the present value or Principal, i is the adjusted interest rate and n is the number of compounding periods.
The principal is PV=$580.
The APR is 4.65% = 0.0465
The compounding period is quarterly.
Since there are 4 quarters in a year, the adjusted interest rate is:
i = 0.0465 / 4 = 0.011625.
The number of periods is n=6 years * 4 = 24 quarters
Now compute the future value:
[tex]FV=580(1+0.011625)^{24}[/tex]Calculating:
[tex]\begin{gathered} FV=\$580\cdot1.31968 \\ FV=\$765.42 \end{gathered}[/tex]The future value is $765.42 and the present value is $580, so the interest is:
I = $765.42 - $580
I = $185.42
