Question

Carter puts 800.00 into an account to use for school expenses the account earns 7%interest compounded monthly how much will be in the account after 8 years

Answer 1

The formula for compound interest is:

`F=P(1+r)^n`

Where

F is future amount [what we want]

P is initial amount [Here, 800]

r is rate of interest per period [7% annual, so monthly would be 7/12 = 0.5833%] [in decimal, 0.5833/100 = 0.0058]

n is time period, or number of compoundings [monthly for 8 years is 8 * 12 = 96 months]

Substituting into formula, we find F:

`\begin{gathered} F=P(1+r)^n \\ F=800(1+0.0058)^(96) \\ F=800(1.0058)^(96) \\ F=1393.8196 \end{gathered}`

Rounding to nearest cent, the account will be worth:

$1393.82