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Popular Word Problems >

Darren invests 4, 500 into an account that earns 5% annual interest. How much will be in the account after 10 years if the interest rate is compounded monthly?

Solution

D a rre n in v es t s 4, 500 in t o an a cco u n t t ha t e a r n s 5% ann u a l in t eres t . Ho w m u c h w i ll b e in t h e a cco u n t a f t er 10 ye a rs i f t h e in t eres t r a t e i s co m p o u n d e d m o n t h l y ?

Solution

Amount : 7411.54

Solution steps

Translate the problem into an equation:

A = 4500 (1 + \frac{0.05}{12})^{12 \cdot 10}

4500 (1 + \frac{0.05}{12})^{12 \cdot 10} = 7411.54273 \dots

Round to the nearest hundredth:

7411.54

Amount : 7411.54

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