Question

A $2000 principal earns 4% interest, compounded monthly. After 3 years, what is the balance in the account?

Answer 1

2000 X 0.4 = 800
monthly=month 12 months in 1 year
12 X 3 = 36
800 X 36= 28800

The balance in the account is $28800

Answer 2

Principal, P = $2000

Rate , r= 4% = 0.04

Compounded monthly , So , n=12

Time , t=3 years

The formula we use here is

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

Lets plug the given values

`A= 2000(1+(0.04)/(12) )^(12(3))`

`A= 2000((301)/(300) )^(36)`

Plug in calculator for final answer

A= $2254.54

After 3 years the balance in account should be approx $2254.54