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.)

To calculate the future value of the cash reserve account, we can use the **future value of an annuity formula** because the company makes regular deposits every quarter. The formula for the future value $ FV $ of an annuity compounded at regular intervals is:

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

Where:
- $ P $ is the amount of each deposit,
- $ r $ is the interest rate per period (quarterly in this case),
- $ n $ is the total number of periods (number of quarters),
- $ FV $ is the future value of the account.

### Given:
- $ P = 12,000 $ (deposit per quarter),
- Annual interest rate = $ 1.95\% $ compounded quarterly, so the quarterly rate $ r = \frac{1.95\%}{4} = 0.004875 $,
- $ n = 4 \times t $, where $ t $ is the number of years.

If you would like me to calculate the future value for a specific number of years or quarters, please provide that detail, and I can complete the calculation.

Would you like to specify the time frame or need any clarifications?

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**5 Related Questions:**
1. How would the future value change if the interest rate were higher or lower?
2. What if the company increased the deposit amount each quarter?
3. How is the formula different if the interest is compounded monthly instead of quarterly?
4. What is the impact of inflation on the real value of the cash reserve?
5. Can you explain the concept of compound interest more deeply?

**Tip:** Compounding frequency (quarterly, monthly, etc.) can significantly affect the future value of an investment.

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.

Discover how to calculate the future value of a cash reserve account with quarterly deposits of $12,000 and 1.95% interest compounded quarterly. Learn the key finance formulas for compound interest and future value of annuities, ideal for students or professionals in finance.

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