The future value of a $3000 investment at a 1.25% annual interest rate, compounded monthly for 4 years, is approximately $3,152.83 using the compound interest formula.
To calculate the future value of an investment using compound interest, we can apply the formula A=P(1+r/n)^(nt), where:
A is the future value of the investment,
P is the principal amount (initial investment),
r is the annual interest rate (as a decimal),
n is the number of times interest is compounded per year, and
t is the number of years.
Given an initial investment of $3000, an annual interest rate of 1.25%, compounded monthly (n = 12), over t = 4 years, we have:
A = 3000(1 + 0.0125/12)^(12*4)
Converting the percentage to a decimal:
A = 3000(1 + 0.00104167)^(48)
Calculating the compound interest:
A = 3000(1.00104167)^(48)
A ≈ 3000(1.050944)
A ≈ $3,152.83
So, after 4 years, the total future amount with compound interest will be approximately $3,152.83.
The probable question may be:
Explore compound interest with this mathematics problem. If an initial investment of $3000 grows at an annual interest rate of 1.25%, compounded monthly for 4 years, how much money will there be at the end of the investment period
Additional Information:
Imagine you invest $3000 in a savings account offering a fixed interest rate of 1.25% per year, compounded monthly. The formula A=P(1+r/n)^nt helps calculate the future value, where:
A is the future value of the investment.
P is the principal amount (initial investment).
r is the annual interest rate (as a decimal).
n is the number of times interest is compounded per year.
t is the number of years.