3. Lena Dimock is saving for her college expenses. She sets aside $200 at the beginning of each three months in an account paying 8% annual interest, compounded quarterly. How much will Lena have accumulated in the account at the end of four years?

Question

3.	Lena Dimock is saving for her college expenses.  She sets aside $200 at the beginning of each three months in an account paying 8% annual interest, compounded quarterly.  How much will Lena have accumulated in the account at the end of four years?

anonymous · Answer

Use the future value annuity formula$$FV=PMT((1+i)^n-1)\div(i)$$ where 
FV=future value
PMT = Periodic payment amount
i=interest rate 
n=number of periods (4 per year * 4 years = 16)
$$FV=200((1+.08)^{16}-1)\div.08=$6064.86$$
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