Question

You deposit $4000 in an account earning 3% interest compounded monthly. How much will you have in the account in 10 years?$______________________

Answer 1

To answer this question we will use the following formula for compounded interest:

`\begin{gathered} P=P_0(1+(r)/(12))^(12t),^{} \\ \text{where P}_0\text{ is the initial amount, r i}s\text{ the interest rate as a decimal number and t is the } \\ n\text{umber of years.} \end{gathered}`

Substituting P₀=4000, r=0.03 and t=10 we get:

`P=4000(1+(0.03)/(12))^(120)\text{.}`

Simplifying the above result we get:

`\begin{gathered} P=4000(1+0.0025)^(120) \\ \approx77432.60. \end{gathered}`

Answer: $77432.60.