Use the compound interest formula for compounding more than once a year to determine the accumulated balance after the stated period. $1200 deposit at an APR of 4% with quarterly compounding for 2 years.

1299.43

Explanation: {'=raise to the power}

A = P (1+r/n) 'nt

A = final amount, P = principal amount, r = rate of interest per time, n = no of time periods, t = no of times interest compounds in a time period.

In this case: A=?, P = 1200, t = year, n = no of years i. e 2, t = compounding in a year i. e 4 times (quarterly), r = APR 4%.

A = 1200 (1 + 0.04/4) ' (2x4)

= 1200 (1 + 0.01) ' (2x4)

= 1200 (1.01) '8

= 1200 (1.083)

= 1299.43