Question

A bank offers an investment account with an annual interest rate of 1.14% compounded monthly. Lashonda invests $3400 into the account for 2 years. Answer the questions below. Do not round any intermediate computations, and round your final answers to the nearest cent. If necessary, refer to the list of financial formulas х 5 ? (a) Assuming no withdrawals are made, how much money is in Lashonda's account after 2 years? ​

Answer 1

Using the future value formula for compound interest, Lashonda's investment of $3400 with an annual interest rate of 1.14% compounded monthly for 2 years amounts to approximately $3482.43.

Step-by-step explanation:

The student is asking about the future value of an investment with compound interest. The formula for future value with compound interest is:
FV = P(1 + r/n)ⁿˣ

Where:

• FV is the future value of the investment
• P is the principal amount (the initial amount of money)
• r is the annual interest rate (in decimal form)
• n is the number of times that interest is compounded per year
• x is the number of years the money is invested for

Applying the formula to Lashonda's investment:

P = $3400

r = 0.0114 (1.14% annual interest rate)

n = 12 (compounded monthly)

t = 2 (invested for 2 years)

So the future value of Lashonda's account after 2 years is calculated as:

FV = 3400(1 + 0.0114/12)(12 × 2)

Calculating this gives us:

FV = 3400(1 + 0.00095)24

FV = 3400(1.00095)24

FV = 3400 × 1.02424329

FV ≈ $3482.43

Therefore, after 2 years, Lashonda's account will have approximately $3482.43.