Question

A retirement account is opened with an initial deposit of $6,500 and earns 5.12% interest compounded monthly. What will the account be worth in 25 years? (Round your answer to the nearest cent.)

Answer 1

To solve this problem we just have to use the compound interest formula, which is:

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

Where r represents the interest rate(written in decimals), t represents the amount of time, P represents the initial deposit, and n represents the amount of times the rate r is compounded for each unit t.

The interest is compounded monthly, therefore, n = 12. Using the given values on this formula, we have:

`\begin{gathered} A=6500(1+(0.0512)/(12))^(12\cdot25) \\ \approx23314.59 \end{gathered}`

The retirement account will be worth $23,314.59.