Question

Suppose you’ve just deposited $1,739 in a bank account which earns

an annual rate of return of 6% compounded
monthly.
How much will you have in the bank account after 3 years, if
interest is compounded monthly?

Answer 1

To calculate the future value of the bank account after 3 years with a monthly compounded interest rate of 6%, you can use the formula and plug in the given values. The amount in the bank account would be $2,127.84.

Step-by-step explanation:

To calculate the future value of the bank account after 3 years, we can use the formula:

FV = P(1 + r/n)^(n*t)

Where:

• FV = Future Value
• P = Principal amount (initial deposit)
• r = Annual interest rate (in decimal form)
• n = Number of times the interest is compounded in a year
• t = Number of years

Given:

• P = $1,739
• r = 6% (0.06 as decimal)
• n = 12 (compounded monthly)
• t = 3 years

Plugging in the values into the formula:

FV = $1,739(1 + 0.06/12)^(12*3)

Simplifying the expression:

FV = $1,739(1 + 0.005)^(36)

FV = $1,739(1.005)^(36)

Calculating:

FV = $1,739 * 1.224

FV = $2,127.84

Therefore, after 3 years, the amount in the bank account would be $2,127.84.