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Bri opened up a savings account that earns 1.25% interest, compounded monthly. If she puts $2500 in the account to start, how much money would be in her account 4 years later, assuming no additional money was deposited or withdrawn from the account? Group of answer choices $2377.32 $2620.36 $2628.11 $2510.43

User Maraujop
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2 Answers

3 votes

Answer: $ 2628.11

Explanation:

Compound interest is nasty.

the formula (which you need to memorize) is:


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

A is the final amount, P is the principle, (original amount of money invested), r is the rate of return (as a decimal NOT percent), n is the number of times compounded annually, and t is the time, (in years), invested.

With all this information, our formula becomes:


A = 2500(1+(0.0125)/(12) )^4^8

solving, we get A ≅ 2628.11

This corresponds to answer choice C

User SamMonk
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8.5k points
2 votes

Answer:

The formula for calculating the future value of an investment with compound interest is:

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

where A is the future value, P is the principal (initial amount), 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 time period in years.

In this case, P = $2500, r = 0.0125 (1.25% as a decimal), n = 12 (since the interest is compounded monthly), and t = 4.

Plugging these values into the formula, we get:

A = 2500(1 + 0.0125/12)^(12*4) ≈ $2,628.11

Therefore, the answer is $2628.11.

User Simon West
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8.6k points