Question

Suppose that you invest $12,500 into a high yield savings account that earns 4.2% annual interest and is compounded monthly. If you do not deposit or withdraw any money from the account, how much money will be in the account after 5 years? Show your equation. Round your answer to the nearest cent.

Answer 1

To find the amount of money in the account after 5 years, use the formula for compound interest.

Step-by-step explanation:

To find the amount of money in the account after 5 years, we can use the formula for compound interest:

A = P(1 + r/n)^(nt)

where A is the amount of money in the account after t years, P is the principal amount (initial investment), r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years.

For this problem, we have:

P = $12,500

r = 4.2% = 0.042 (in decimal form)

n = 12 (since interest is compounded monthly)

t = 5

Substituting these values into the formula, we have:

A = $12,500(1 + 0.042/12)^(12*5)

Calculating the value, we find that the amount of money in the account after 5 years is approximately $14,151.46.

Answer 2

Calculating the amount by using the formula A = P(1 + r/n)^(nt).

Plugging in the values, the account will have approximately $14,195.41.

Step-by-step explanation:

To calculate the amount of money in the account after 5 years, we can use the formula : A = P(1 + r/n)^(nt)

Where:

• A = the final amount of money in the account
• P = the initial amount of money you invest, which is $12,500
• r = the annual interest rate, which is 4.2%
• n = the number of times the interest is compounded per year, which is 12 for monthly compounding
• t = the number of years, which is 5

Plugging in the values, we have:

A = 12500(1 + 0.042/12)^(12*5)

Calculating this expression, we find that after 5 years, the account will have approximately $14,195.41.