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Arturo’s parents deposit $50 each month into a college savings account with a 5.75% interest rate, compounded monthly.

About how much money did Arturo’s parents invest after 10 years?
About how much interest was earned after 10 years?
Between 10 years and 20 years, how much more interest would you expect the account to earn?

User Petrsyn
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1 Answer

11 votes

Final answer:

Arturo's parents would have invested about $7,532.94 after 10 years and would have earned about $2,532.94 in interest. Between 10 years and 20 years, the account would earn more interest.

Step-by-step explanation:

To calculate the amount of money Arturo's parents invested after 10 years, we can use the compound interest formula:

A = P(1+r/n)^(nt)

Where A is the final amount, P is the principal amount (initial deposit), r is the interest rate, n is the number of times interest is compounded per year, and t is the number of years.

In this case, the principal amount is $50, the interest rate is 5.75%, interest is compounded monthly, and the number of years is 10:

A = 50(1+0.0575/12)^(12x10) = $7,532.94

The interest earned after 10 years can be calculated by subtracting the principal amount from the final amount:

Interest = $7,532.94 - $50(10x12) = $2,532.94

Between 10 years and 20 years, the account would earn more interest because the interest would compound on a larger principal amount.

The exact amount of additional interest earned would depend on the monthly deposits made by Arturo's parents during this period.

User Ybbest
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