Question

2. Use the appropriate formula. Suppose you want to invest $1000. If the interest rate is 6% and the method of compounding monthly is applied, how much will be in the account after 4 years?

A=P（1+ r/n)^nt Or A=Pe^rt

A) Plug the appropriate numbers into the appropriate formula (only one of the formulas is appropriate for this problem).

b) Compute the final answer (use calculator). Round to the nearest cent.

Answer 1

The amount in the account after 4 years, with an interest rate of 6% and monthly compounding, will be approximately $1221.41.

Step-by-step explanation:

To calculate the amount in an account after 4 years, we can use the formula A = P(1 + r/n)^(nt), where:

• A is the final amount in the account
• P is the initial investment ($1000 in this case)
• r is the annual interest rate (6% in this case)
• n is the number of times the interest is compounded per year (12 in this case, since it's compounded monthly)
• t is the number of years (4 in this case).

Substituting the values into the formula:

A = $1000(1 + 0.06/12)^(12 * 4)

A = $1000(1 + 0.005)^48

A = $1000(1.005)^48

Using a calculator, we find that A ≈ $1221.41