Question

If sally invests $400 into the Bank of Reyonds that offers her a 6% interest, compounded monthly, how much money will she have in the bank in 5 years?

Answer 1

Given:

Principal = $400

Rate of interest = 6% compounded monthly

Time = 5 years.

To find:

The amount in the bank after 5 years.

Solution:

The formula for amount is:

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

Where, P is principal, r is the rate of interest, n is the number of time interest compounded in an year and t is the number of year.

Interest compounded monthly. So,
`n=12`.

Putting
`P=400, r=0.06, n=12` and
`t=5`, we get

`A=400\left(1+(0.06)/(12)\right)^(12(5))`

`A=400\left(1+0.005 \right)^(60)`

`A=400\left(1.005 \right)^(60)`

`A\approx 539.54`

Therefore, the amount of money in the bank after 5 years is $539.54.