Question

Sarah opens a savings account that has a 2.75% annual interest rate,

compounded monthly. She deposits $500 into the account. How much will
be in the account after 15 years?

$500.00
$754.94
$1255.27
$255.27

Answer 1

Answer: $754.94

Explanation:

We would apply the formula for determining compound interest which is expressed as

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

Where

A = total amount in the account at the end of t years

r represents the interest rate.

n represents the periodic interval at which it was compounded.

P represents the principal or initial amount deposited

From the information given,

P = 500

r = 2.75% = 2.75/100 = 0.0275

n = 12 because it was compounded monthly which means 12 times in a year.

t = 15 years

Therefore,.

A = 500(1+0.0275/12)^12 × 15

A = 500(1+0.0023)^180

A = 500(1.0023)^180

A = $754.94