Question

You have decided to start saving for college and open up a 529 account. You invest $5,000 into the account at a 3% interest rate compounded monthly. How much money will you have after 6 years?

a) $5,795.43
b) $6,210.68
c) $7,083.54
d) $7,427.16

Answer 1

The amount of money you will have after 6 years in a 529 account with a $5,000 investment at a 3% interest rate compounded monthly is $6,210.68. Option B is correct.

Step-by-step explanation:

To calculate the amount of money you will have after 6 years, we can use the compound interest formula: A = P(1 + r/n)^(nt), where A is the final amount, P is the principal amount, r is the interest rate, n is the number of times the interest is compounded per year, and t is the number of years.

In this case, the principal amount (P) is $5,000, the interest rate (r) is 3%, and the interest is compounded monthly, so n = 12. Plug in these values into the formula:

A = 5000(1 + 0.03/12)^(12*6)

After calculating, you will find that the final amount (A) is approximately $6,210.68.