34.6k views
4 votes
On your second birthday, your parents deposited $500 into a savings account that earns 7% interest and compounds monthly. How much will be in the account when you are 18 years old

User Gandhi
by
9.0k points

1 Answer

5 votes

Answer: $1755 will be in the account when you are 18 years old.

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 = 7% = 7/100 = 0.07

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

t = 18 years

Therefore,

A = 500(1 + 0.07/12)^12 × 18

A = 500(1 + 0.00583)^216

A = 500(1.00583)^216

A = $1755

User Ben Mabey
by
8.0k points

No related questions found

Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories