Question

How much would $500 invested at 6% interest compounded monthly be worth after 5 years? Round your answer to the nearest cent. A.$669.11B.$674.43C.$886.41D.$512.63

Answer 1

Given that;

`\begin{gathered} Principal=P=\text{ \$500} \\ rate=r=(6)/(100)=0.06 \\ time=t=\text{ 5 years} \end{gathered}`

To find the amount in 5 years, we will apply the compound interest formula below

`\begin{gathered} A=P(1+(r)/(n))^(nt) \\ Since,\text{ it is compounded montly, n = 12} \end{gathered}`

Substitute the values of the variables into the formula above

`\begin{gathered} A=500(1+(0.06)/(12))^((5*12))=500\left(1+(0.06)/(12)\right)^(60)=674.42507 \\ A=\text{ \$}674.43\text{ \lparen nearest cent\rparen} \end{gathered}`

Hence, the answer is B