how do i solve this question?

Question

$1200 is put into savings that pays 8% interest compuonded quarterly. how much will be in savings after six years?

Answer 1

In an ideal mathematical world, you'd have in your savings $1200 x (1.02)^24 = $1930.12.

However, it is like to differ by a few cents from this because every quarter, what you have will PROBABLY be rounded to the nearest cent. So don't BANK on getting precisely those 12 cents at the end!

That means that you can only figure out what you'd receive from a real world bank by laboriously multiplying your capital at the start of each quarter by 1.02, rounding the result, and repeating that tedious process for 24 times altogether. (A factor in the outcome will be whether your Bank will round up mathematically to the next cent when it's like $1273.4496, as it would be after 3 iterations, or whether they'll truncate it. What's YOUR guess? Mine is that those miserable skinflints will truncate it! They know which side their bread is buttered on.)

I'll leave that all as an exercise for you!

Live long and prosper.

Answer 2

S = 1200(1 + .08/4)^(4•6)
S = 1200(1.02)^24
S = 1930.12