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Use the compound interest formula for compounding more than once a year to determine the accumulated balance after the stated period. $5500 deposit at an APR of 5% with monthly compounding for 6 years

a. 55638.94
b. 55935.68
c. 57419.60
d. 544,45993

1 Answer

3 votes

Final answer:

The correct accumulated balance after 6 years with $5500 deposited at an APR of 5% with monthly compounding must be calculated using the compound interest formula and no matching answer is found among the provided options.

Step-by-step explanation:

To determine the future balance of a compound interest account, we use the formula A = P(1 + r/n)nt, where A is the amount of money accumulated after n years, including interest, P is the principal amount ($5500), r is the annual interest rate (5% or 0.05), n is the number of times that interest is compounded per year (monthly compounding means n=12), and t is the time the money is invested for (6 years).

Calculating the amount we have: A = $5500(1 + 0.05/12)12*6. This equates to $5500(1 + 0.00416666667)72, which computes to approximately $5500 * 1.348856261. The calculated amount would give us the total balance. Since none of the provided options matches the calculated result, we conclude that the answer must be recalculated if the student provided the choices correctly.

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