Question

If $500 were deposited into an account paying 5% interest, compound monthly, how much would be in the account in 4 years?

Please show me proper work and a good explanation on how you got said answer.

Answer 1

610.48

Explanation:

The formula for compound interest is

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

A is the amount in the account

P is the principle

r is the interest rate

n is the number of times the interest is compounded per year

t is the time in years

A = 500(1+.05/12) ^12*4

A = 500(1+.0041666666) ^48

A = 500(1.0041666666) ^48

A = 500*1.220895355

A =610.4476775

Rounding to the nearest cent

A = 610.48