Patrick deposited $6,875 into a savings account 17 years ago. The account has an interest rate o
f 4.9% and the balance is currently $15,734.11. How often does the interest compound?

annually, daily, monthly or quarterly??

Question

Patrick deposited $6,875 into a savings account 17 years ago. The account has an interest rate o 
f 4.9% and the balance is currently $15,734.11. How often does the interest compound? 
 
annually, daily, monthly or quarterly??

anonymous · Answer

fv = pv(1 + i)^N

so fv / pv = (1 + i)^N
15734.11 / 6875 = 2.2886 = (1+i)^N

If interest was compounded quarterly
i = 4.9 / (4 x 100) = 0.01225 and
N = 17 x 4 = 68

so (1+i)^N = 1.01225^68 = 2.2886

Since 2.2886 = 2.2886 interest was compounded quartrly. 

Does this help? :-)