Question

Krammer Bank offers a CD (i.e., certificate of deposit) that pays 3.55% p.a., but with monthly compounding. If Lebron deposits $250,000 into this account today, how much will he have in his account in exactly 18 years?

Answer 1

To calculate the final amount in Lebron's bank account after 18 years, we can use the formula for compound interest. The principal is $250,000, the annual interest rate is 3.55% with monthly compounding, and the number of years is 18. Plugging these values into the formula will give you the final amount.

Step-by-step explanation:

To calculate the amount of money Lebron will have in his account in 18 years, we can use the formula for compound interest:

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

Where:

A is the final amount

P is the principal (initial deposit)

r is the annual interest rate (in decimal form)

n is the number of times interest is compounded per year

t is the number of years

In this case, the principal (P) is $250,000, the annual interest rate (r) is 3.55% (or 0.0355 as a decimal), the number of times interest is compounded per year (n) is 12 (monthly compounding), and the number of years (t) is 18. Plugging these values into the formula gives:

A = 250,000(1 + 0.0355/12)^(12*18)

Calculating this expression will give you the final amount that Lebron will have in his account in 18 years.

Answer 2

The future value of Lebron's CD account with $250,000 deposited at a 3.55% interest rate compounded monthly after 18 years is $482,947.69.

Step-by-step explanation:

The student is looking to find out how much they will have in their account after investing $250,000 in a bank certificate of deposit (CD) with a 3.55% interest rate compounded monthly. The formula to calculate the future value of a compound interest account is:

A = P(1 + r/n)nt

Where:

P is the principal amount ($250,000)

r is the annual interest rate (3.55% or 0.0355 as a decimal)

n is the number of times that interest is compounded per year (12)

t is the time the money is invested for, in years (18)

Using the provided data, Lebron's account balance after 18 years would be calculated as follows:

A = $250,000(1 + 0.0355/12)12*18

After crunching the numbers, Lebron would have a total amount of $482,947.69 in the CD after 18 years.