Question

4. A savings account is started with $10,000. Calculate the

current value of the account in 5 years for both of the
following scenarios.

(a) Interest is earned at a rate of 2.3% and is compounded
monthly,

Answer 1

• $1217.50

Explanation:

Given:

• Principal P = $10000
• Interest rate r = 2.3% = 0.023
• Compound number n = 12
• Time t = 5 years

Interest amount is:

• I = P(1+ r/n)^(nt) - P
• I = 10000(1 + 0.023/12)^60 - 10000 = $1217.50