Question

Use the compound interest formula to determine the final value of the following amount. $1900 at 10.4% compounded monthly for 4.5 years . What is the final value of the amount?

Answer 1

$3027.80

Step-by-step explanation:

The compound interest formula is the following.

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

where

A = final amount

P = principle amount

r = interest rate / 100

n = number of compounds per interval

t = time interval

Now in our case,

A = unknown

P = $1900

r = 10.4/100

n = 12 months / year ( because the interest is compounded monthly)

t = 4.5 yrs

Therefore, the compound interest formula gives

`A=1900(1+(10.4/100)/(12))^(12*4.5)`

Using a calculator, we evaluate the above to get

`\boxed{A=\$3027.80}`

which is our answer!