39.6k views
3 votes
An account with a starting balance of $3,330 earns 5% interest compounded monthly. Calculate the ending balance after 7 years to the nearest penny.

User EEE
by
7.7k points

1 Answer

6 votes

Final answer:

To calculate the ending balance of an account with $3,330 at 5% interest compounded monthly after 7 years, use the compound interest formula: A = P(1 + r/n)^(nt), with P = $3,330, r = 0.05, n = 12, t = 7. Compute A to find the final amount, rounded to the nearest penny.

Step-by-step explanation:

The student is interested in calculating the ending balance of an account with a starting balance of $3,330 that earns 5% interest compounded monthly after 7 years. To solve this, we use the formula for compound interest: A = P(1 + r/n)^(nt), where:

  • P = principal amount (initial investment)
  • r = annual interest rate (decimal)
  • n = number of times interest is compounded per year
  • t = time in years
  • A = amount of money accumulated after n years, including interest.

To find the ending balance, substitute the given values into the formula:

P = $3,330, r = 5/100 = 0.05 (since interest rate is given in percentage, we convert it to decimal), n = 12 (since interest is compounded monthly), and t = 7 (for 7 years).

Now, calculate A using the formula:

A = 3330(1 + 0.05/12)^(12*7)

Simplify the expression inside the parentheses and exponents to get the ending balance. Remember, always round to the nearest penny when dealing with currency.

User Miluz
by
7.7k points

No related questions found