Question

Erik puts $6,000.00 into an account to use for school expenses. The account earns 5%interest, compounded monthly. How much will be in the account after 8 years?

Answer 1

`A=\text{ \$8,944 after 8 years.}`

Explanation:

Compounded interest is represented by the following equation:

`\begin{gathered} A=P(1+(r)/(n))^(nt) \\ \text{where,} \\ P=\text{ principal invested} \\ r=\text{ interest rate} \\ n=\text{ number of times compounded per unit t} \\ t=\text{ time in years} \end{gathered}`

Then, for a principal of $6,000.00 at a 5% interest, compounded monthly. After 8 years Erik would have:

`\begin{gathered} A=6000(1+(0.05)/(12))^(96) \\ A=\text{ \$8,943.51} \\ \text{ Rounding to the nearest cent:} \\ A=\text{ \$8,944 after 8 years.} \end{gathered}`