Question

You deposit $2500 in an account that pay 5.25% annual interest. What is the balance of the account after 4 years if the interest is compounded monthly? Round your answer to the nearest hundredth.

Answer 1

$91,857,996,748.33

Explanation:

To calculate this, we use the compound interest formula

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

where A is the balance we want to

calculate

P is the deposit amount = $2,500

r is the interest rate = 5.25%

n is the number of times we compound per year. Since it is monthly, we have it as 12 times per year

t is the

number of years = 4 years

Substituting these values, we have that;

A = 2,500 ( 1 + 5.25/12)^(4)(12)

A = 2,500( 1 + 0.4375)^48

A = 2500(1.4375)^48

A = 91,857,996,748.32578

To the nearest hundredth we have;

$91,857,996,748.33