Let's test it on the last one we figured out:
If we invest $1.00 in an account that pays 12% compounded quarterly, how much will we have in the account at the end of one year?
initial amount = $1.00
At the end of each period (quarter), we'll be earning 3%...
So, each $1.00 will turn into $1.03
growth factor = $1.03
number of periods = 4
Here's the formula:
So, with our numbers:
Hey, it works! We got the same amount that we got doing it the long way... And this was a LOT easier.