Question

What sum of money will grow to $3,184.41 in nine years at 3% compounded monthly?

Select one:

a. $2,431.73

b. $2,517.88

c. $2,520.41

d. $2,498.47

Answer 1

P = $2,431.73

Explanation:

The compound interest formula is given by:

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

Where A is the amount of money, P is the principal(the initial sum of money), r is the interest rate(as a decimal value), n is the number of times that interest is compounded per unit t and t is the time the money is invested or borrowed for.

In this exercise, we have:

A = 3,184.41

r = 0.03

n = 12(t is measured in years, and the money is compounded monthly)

t = 9

We want to know P

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

`P = (3,184.41)/((1 + (0.03)/(12))^(12*9))`

`P = (3,184.41)/((1 + 0.0025)^108)`

`P = (3,184.41)/(1.31)`

`P = $2,431.73`