Question

You deposit $6,500 into an account paying 8% annual interest compounded monthly. How much money will be in the account after 7 years? (also called Future value). Round to the nearest cent if necessary.

a) $10,821.69
b) $10,950.00
c) $11,215.46
d) $11,372.82

Answer 1

The account with a $6,500 deposit at 8% annual interest compounded monthly will have approximately $11,358.54 after 7 years, which is not one of the provided options.

Step-by-step explanation:

When you deposit $6,500 into an account paying 8% annual interest compounded monthly, you are looking to calculate the future value of this investment after 7 years. This can be done using the compound interest formula:

Future Value = Principal × (1 + (interest rate / number of compounding periods per year))^(number of compounding periods per year × number of years)

Substituting the given values, we get:

Future Value = $6,500 × (1 + (0.08/12))^(12 × 7)

Future Value = $6,500 × (1 + 0.0066667)^(84)

Future Value = $6,500 × (1.0066667)^84

Future Value = $6,500 × 1.747467

Future Value = $11,358.54, which we round to the nearest cent, resulting in $11,358.54.

Therefore, the correct answer is not listed in the given options a) through d), and the actual amount in the account after 7 years would be approximately $11,358.54.