Question

Alex has obtained $1,000 and he takes it to the bank where the account is compounded monthly at 5%. He will leave it for 10 years. How much money will he have after 10 years?

Answer 1

If it compounds monthly at a 5% clip, then it would increase by 50 dollars a month: 1000 x 5% = 50.

There are 12 months to a year, so we have 120 months in 10 years: 12 x 10 = 120.

We can multiply these two numbers together to see how much growth we have:

120 x 50 = 6000.

Add this number back to our original $1,000, and we get $7,000.