Question

You have an account with $ 7007.08 . You transfer this amount into an account paying 9 % annual interest compounded monthly. How much money will be in the account after 6 years? (also called future value).

Answer 1

Around $12,000 [or $11,999]

Explanation:

This can be solve using the formula:

`F=P(1+r)^t`

Here

F is future amount [what we want to find]

P is the present amount [7007.08]

r is the rate of interest, monthly, since compounding is monthly [9/12 = 0.75% = 0.0075]

t is the number of compoundings [compounded monthly for 6 years, 6 * 12 = 72)

Now substituting, we get:

`F=P(1+r)^t\\F=7007.08(1+0.0075)^(72)\\F=7007.08(1.0075)^(72)\\F=11,999.99`

So amount will be around $12,000