A savings account earns an interest rate of 2.75% compounded monthly for an account with an initial deposit of 5, 000. How much money will be in the account after 8 years? Round your answer to the nearest hundredth.

Solution

A s a v in g s a cco u n t e a r n s an in t eres t r a t e o f 2.75% co m p o u n d e d m o n t h l y f or an a cco u n t w i t h an ini t ia l d e p os i t o f 5, 000. Ho w m u c h m o n ey w i ll b e in t h e a cco u n t a f t er 8 ye a rs ? R o u n d yo u r an s w er t o t h e n e a res t h u n d re d t h .

Amount : 6228.82

Solution steps

Translate the problem into an equation:

A = 5000 (1 + \frac{0.0275}{12})^{12 \cdot 8}

5000 (1 + \frac{0.0275}{12})^{12 \cdot 8} = 6228.81566 \dots

Round to the nearest hundredth:

6228.82

Amount : 6228.82