Question

suppose you invest $1600 at an annual interest rate at 4.6% compounded monthly. how much money will you have in the account after 4 year?

Answer 1

Formula for Compound Interest:

Amount = Principle
`( 1+(r)/(n) )^(nt)`

Principle = Initial amount

r = interest rate (as a decimal)

n = how many times compounded per year

t = time ( as years)

What we know:

Principle = $1600

r = 4.6% converted to decimal = 0.046

n = compounded monthly so 12 times a year = 12

t = 4

Plug in the known values to the formula to find what the Amount is

Amount = 1600
`(1+(0.046)/(12)) ^(12*4)`

Solve

= 1600(1.0038333...)^48

The dots are because it is either a repeating or non repeating decimal and I didn't round till the end.

Do the exponents first because PEMDAS

= 1600(1.201593...)

Amount = $1922.55

Rounded to the nearest cent.

Avoid common errors by-

converting r to a decimal and leaving it a %

making sure that t is in years

making sure that n is the number of time compounded every year