To establish a "rainy day" cash reserve account, a certain company deposits $12,000 of its profit at the end of each quarter into a money market account that pays 1.95% interest compounded quarterly. (Round your answers to the nearest cent.)
(a)
How much (in $) will the account be worth in 4 years?

To find how much the account will be worth in 4 years, we can use the future value formula for compound interest with regular deposits:

\[
FV = P \times \frac{(1 + r/n)^{nt} - 1}{r/n}
\]

Where:
- $ P $ is the deposit made at the end of each period ($12,000)
- $ r $ is the annual interest rate (1.95% or 0.0195)
- $ n $ is the number of times the interest is compounded per year (quarterly, so $ n = 4 $)
- $ t $ is the number of years (4 years)

Now, let’s calculate:

\[
FV = 12,000 \times \frac{(1 + \frac{0.0195}{4})^{4 \times 4} - 1}{\frac{0.0195}{4}}
\]

I’ll compute this for you.The account will be worth approximately **$199,182.27** in 4 years.

Would you like more details or have any questions?

Here are 5 related questions you could explore:
1. What if the company deposited a different amount each quarter?
2. How does changing the interest rate affect the future value?
3. What would happen if the company made monthly deposits instead of quarterly?
4. How long would it take to reach a specific target amount, say $250,000?
5. What happens if the company withdraws some of the funds during the period?

**Tip**: Compound interest grows faster over time due to the effect of earning interest on interest. The more frequent the compounding, the greater the future value.

To establish a 'rainy day' cash reserve account, a certain company deposits $12,000 of its profit at the end of each quarter into a money market account that pays 1.95% interest compounded quarterly. (Round your answers to the nearest cent.) (a) How much (in $) will the account be worth in 4 years?

Discover how to calculate the future value of quarterly deposits of $12,000 into a money market account with 1.95% interest compounded quarterly over 4 years. Learn the step-by-step application of the compound interest formula. Suitable for finance and business students.

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