Question

An account earns an annual rate of 5.4% compounded monthly. If $3,000 is deposited into this account, then after 3 years there is $___. Round your answer to two decimals.

Answer 1

Given:

rate (r) = 5.4% or 0.054 in decimal form

Principal (P) = $3,000

time in years (t) = 3 years

number of conversions per year (m) = 12 (because it says monthly)

Find: future value or maturity value

Solution:

The formula for getting the future value of a compound interest is:

`F=P(1+(r)/(m))^(mt)`

Let's plug in the given data to the formula above.

`F=3,000(1+(0.054)/(12))^(12*3)`

Then, solve for F or future value.

`\begin{gathered} F=3,000(1.0045)^(36) \\ F=3,000(1.17532999) \\ F\approx3,526.30 \end{gathered}`

Answer: After 3 years, the deposited money will become $3, 526.30.