Question

Gloria has an account that draws interest at the rate of

6 percent per year, compounded monthly at 0.5 percent. The amounts listed below were deposited in the account in the cur. rent year. What is the balance in the account on December 31 of the current year? (If available, use spreadsheet software to do the computations.)
June 1, $50; July 1, $50; August 1, $50; and September 1, $50

Answer 1

$205.45.

Step-by-step explanation:

Assuming the deposits were made at the beginning of each month, the balance in the account on June 1 is $50. This balance earns interest of 0.5% per month (or 6% per year). After adding the next three monthly deposits of $50 each, the balance is $200. During the following four months, interest of 0.5% per month is earned on the balance of $200. This adds an additional $5.45 in interest for the year. The total balance in the account on December 31 is the initial balance of $50 plus the three deposits of $50 each, plus the interest earned of $5.45, for a total of $205.45.