Final answer:
Roberto will have approximately $391.08 in his savings account after 3 years due to the effects of compound interest with an annual rate of 1.4% compounded monthly.
Step-by-step explanation:
To calculate how much money Roberto will have in his savings account after 3 years with an interest rate of 1.4% compounded monthly, we use the compound interest formula:
A = P(1 + rac{r}{n})^{nt}
Where:
A is the amount of money accumulated after n years, including interest.
P is the principal amount (the initial amount of money).
r is the annual interest rate (decimal).
n is the number of times that interest is compounded per year.
t is the time the money is invested for, in years.
Using the values given:
P = $375
r = 1.4% or 0.014 (as a decimal)
n = 12 (since the interest is compounded monthly)
t = 3 years
The calculation will be:
A = 375(1 + rac{0.014}{12})^{12 imes 3}
Calculating the above, we find that the amount A Roberto will have is approximately:
A ≈ $391.08
To start saving money early in life and harness the power of compound interest as shown in an example for a longer term investment:
3,000(1+.07)40 = $44,923
The concept is that compound interest allows the investment to grow exponentially over time.