Question

How much money invested at 3% compounded monthly for 3 years will yield $520?

$179.42
$475.30
$358.84
$148.78

Answer 1

Explanation:

Use this formula:

`A(t)=P(1+(r)/(n))^(nt)` where A(t) is the amount after the compounding is done, P is the initial investment (our unknown), r is the interest rate in decimal form, n is the number of compoundings per year, and t is the time in years. Filling in:

`520=P(1+(.03)/(12))^((12)(3))` and simplifying that a bit:

`520=P(1+.0025)^{36` and a bit more:

`520=P(1.0025)^{36` and even bit more:

520 = P(1.094551401) and divide to get

P = $475.30