Question

suppose that $6,200 is invested at 4.9% annual interest rate, compounded monthly. how much money will be in the amount in (A) 11 months? (B) 6 years?

Answer 1

Apply the compound interest formula:

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

Where:

A = value of investment + interest

P = principal amount = $6,200

r= interest rate ( in decimal form) = 4.9/100 = 0.049

n= number of compounding periods

t= number of years

Replacing:

1 year = 12 months

11 months = 0.92 years

a. 11 months

A = 6,200 (1 + 0.049/12 ) ^ 12 x 0.92

A = 6,200 ( 1.004083333)^ 11

A = $6,484.24

b.For 6 years

A = 6,200 (1 + 0.049/12)^12 x 6

A = $8,314.08