Final answer:
Jake's account balance after 5 years will be approximately $25,486.74, using the compound interest formula and considering monthly compounding of a 3.5% annual interest rate, making option c the correct answer.
Step-by-step explanation:
The question asked is about compound interest, which is a financial concept where interest is calculated on the initial principal and also on the accumulated interest from previous periods. To solve this problem, we need to use the formula for compound interest:
Final Amount = Principal × (1 + Monthly Interest Rate)^NumberOfMonths
Given that Jake's account has a 3.5% annual interest rate, compounded monthly, and he invests $20,000. We first convert the annual rate to a monthly rate by dividing by 12 (since there are 12 months in a year), which gives us 0.035/12 per month. Then we calculate the number of months over 5 years (5 years × 12 months/year).
The correct computation is then:
$20,000 × (1 + 0.035/12)^(5× 12)
Using a calculator:
$20,000 × (1 + 0.002917)^{60} ≈ $25,486.74
Therefore, the balance after 5 years will be approximately $25,486.74, which corresponds to option c.