Question

How much would $500 invested at 5% interest compounded monthly be worth after 4 years? Round your answer to the nearest cent.

Answer 1

Amount = Principal * (1 + rate/number of compounds)^(number of compounds * number of years) = 500*(1+0.05/12)^(4*12) = 610.45

Answer 2

$610.54

Explanation:

Here we have to use the formula A(t)=P(1+r/n)^nt, where P is the principle, n =12 and t is the number of years.

Given: P = $500, r = 5% = 0.05, t= 4

A(4) =500(1 + 0.05/12)^12*4

= 500(1 + 0.00417)^48

= 500 (1.00417)^48

A(4) = $610.54

Hope this will helpful.

Thank you.