Question

$5,500 how much money would be in the savingaccount after 5 years if the compounds interest monthly at a rate of 5% per year.

Answer 1

There would be $7,058.47 in the saving account.

Explanation:

The amount of money, after t years, with compound interest, is given by the following formula:

`A(t)=P(1+(r)/(n))^(n\ast t)`

In which:

P is the amount of the initial deposit.

r is the interest rate, as a decimal.

n is the number of compoundings per year.

t is the number of years.

In this question:

Deposit of $5,500, so P = 5500.

5 years, so t = 5.

Rate of 5%, so r = 0.05.

Monthly compounding, so 12 times a year, which means that n = 12.

Then

`A(5)=5500(1+(0.05)/(12))^(12\ast5)=7058.47`

There would be $7,058.47 in the saving account.