Question

The Hansons deposit $1000 in an account paying 5%compounded monthly. How much is in the account after 6 months

Answer 1

Given

• $1000 deposited
• 5% compounded monthly
• Amount in the account after 6 months

Compound formula

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

P: principle (amount started with)

r/n: Interest rate

nt: time

1000(1 + .05/12)^6 = $1025.26

Answer

There are $1025.26 dollars in the account after 6 months.

Answer 2

$1025.26

5% compounded each month is
`(5)/(12)\%` per month.

After 6 months, this is total interest of
`(1+(5)/(12)\%)^6-1=1.025262-1=.025262=2.5262\%` by the compound interest formula. Applying this to the original deposit, this gives $1025.26 to the nearest cent.