Suppose you deposited $5,000 in a bank account that pays 5.25% with daily compounding based on a 360-day year. How much would be in the account after 8 months, assuming each mon…

Question

asked Aug 5, 2020 127k views

1 Answer

Mana · Answer 1 · 2020-08-11T14:37:12+0000

Answer:

$5,178.09

Step-by-step explanation:

Data provided in the question:

Principle amount, P = $5,000

Interest rate, r = 5.25%

Duration, t = 8 months =
(8)/(12) years = 0.67 years

Now,

A =
$P \left( 1 + (r)/(n) \right)^{\Large{n \cdot t}}$

Here,

A = total amount

P = principal or amount of money deposited,

n = number of times compounded per year i.e 365 for daily

t = time in years

Thus,

A = $5,000 ×
$\left( 1 + (5.25%)/(365) \right)^{\Large{365 \cdot 0.667}}$

= $5,000 ×
( 1.0001437 )^(243.45)

= $5,000 × 1.035618

= $5,178.09

Hence,

the correct answer is option $5,178.09