Question

The following money market account rates were available from a particular bank. Find the compound amount and the interest earned $16,000 at 1.01% compounded monthly for three years.

The compound amount is _____ $ (Do not round until the final answer. Then round to the nearest cent as needed.)
The interest earned is _____ $ (Do not round until the final answer. Then round to the nearest cent as needed.)

Answer 1

The compound amount after investing $16,000 at 1.01% compounded monthly for three years is approximately $16,489.63, and the interest earned is approximately $489.63.

Step-by-step explanation:

To find the compound amount and interest earned on a money market account with a principal of $16,000 compounded monthly at a rate of 1.01% for three years, we can use the formula for compound interest:

A = P(1 + r/n)nt

Where:

• A is the amount of money accumulated after n years, including interest.
• P is the principal amount ($16,000).
• r is the annual interest rate (decimal) (1.01/100 = 0.0101).
• n is the number of times that interest is compounded per year (12).
• t is the time the money is invested for (3 years).

Substituting the given values, we get:

A = $16,000(1 + 0.0101/12)12*3 = $16,000(1.000841667)36 ≈ $16,000 * 1.030602 ≈ $16,489.63

The compound interest earned is A - P = $16,489.63 - $16,000 = $489.63

So, the compound amount is approximately $16,489.63 and the interest earned is approximately $489.63.