Question

Determine the amount of an investment if $100 is invested at an interest

rate of 5% compounded monthly for 5 years. Round your answer to the
nearest whole dollar. *

Answer 1

$128.34

Explanation:

We will use the compound interest formula to solve this problem:

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

P = initial balance

r = interest rate (decimal)

n = number of times compounded annually

t = time

First, lets change 5% into its decimal form:

5% ->
`(5)/(100)` -> 0.05

Since the interest is compounded monthly, we will use 12 for n. Lets plug in the values now:

`A=100(1+(0.05)/(12))^(12(5))`

`A=128.34`

The amount of the investment after 5 years would be $128.34