You deposited $1,000 in a savings account that pays 8 percent interest, compounded quarterly, planning to use it to finish your last year in college. Eighteen months later, you decide to go to the Rocky Mountains to become a ski instructor rather than continue in school, so you close out your account. How much money will you receive?

You will have a total of $1,126.16

Yes: How did you get the answer. Because whenI use my BA II Texas Instrument, I keep coming up the wrong answer.

First thing to do is determine is how many many periods there are. The problem says that interest is paid quarterly, so you need to determine how many quarters there are. 1 year has 4 quarters and 6 months is another 2 quarters, so there are 6 quarters or 6 periods in this problem. The annual rate needs to be divided by 4 quarters to get the actual interest rate for each quarter or period.

The long way for illistration is:

$1,000 * 8% annual rate /4 quarters = $20 for 1st quarter

$1,000 + 20 = $1,020

$1,020 * 8%/4 = $20.4 for 2nd quarter

$1,020 + 20.4 = $1,040.4

$1,040.4 * 8%/4 = 20.808 for 3rd quarter

$1,040.4 + 20.808 = $1,061.208

$1,061.208 * 8%/4 = $21.22416 for 4th quarter

$1,061.208 + $21,22416 = $1,082.43216

$1,082.43216 * 8%/4 = $21.6486432 for 5th quarter

$1,082.43216 + 21.6486432 = $1,104.080803

$1,104.080803 * 8%/4 = $22.08161606 for 6th quarter

$1,104.080803 + 22.08161606 = $1,126.162419 Total amount after 18 months or 6 quarters.