Question

Aaron invest 7,833 in a savings account with a fixed annual interest rate of 9% compounded 12 times per year. What will the account balance be after 6 years?

Answer 1

The account balance is 13414.43

Explanation:

Given:

Amount invested = 7833

Interest rate = 9% = 9/100 = 0.09

To find: account balance after 6 years when interest is compounded 12 times per year

We know that the formula to calculate final balance when interest is compounded is given by

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

A is final balance

P is amount deposited initially

r is annual interest rate

n is number of times interest is compounded per year

t is time in years

Therefore for given data, final balance is

A = 7833 x
`(1+(0.09)/(12) )^(12 x 6)`

= 7833 x
`1.0075^(72)`

= 7833 x 1.712552707

= 13414.43

Hence the account balance is 13414.43