Question

Suppose you deposit $1600 in an account that pays 7.5% annual interest, compounded monthly. If you don't make any other deposits or withdrawals, how much will the account hold at the end of four years?

Answer: $
(Enter only the number without commas, not the dollar sign. Round your answer to the nearest cent.)

Answer 1

To calculate the amount of money the account will hold at the end of four years, we can use the formula for compound interest. The final amount is calculated to be $1953.89.

Step-by-step explanation:

To calculate the amount of money the account will hold at the end of four years, we can use the formula for compound interest. The formula is:

A = P(1 + r/n)^(nt)

Where A is the final amount, P is the principal amount (initial deposit), r is the annual interest rate (as a decimal), n is the number of times the interest is compounded per year, and t is the number of years.

In this case, the initial deposit is $1600, the annual interest rate is 7.5% (0.075 as a decimal), the interest is compounded monthly (n = 12), and the time period is 4 years. Plugging in these values into the formula, we get:

A = 1600(1 + 0.075/12)^(12 * 4)

Calculating this expression gives the final amount as $1953.89. Therefore, the account will hold $1953.89 at the end of four years.