Question

You want to save for a brand-new car. You put the $5,000 your Grandma gave you when you graduated in an account that pays 6% interest and is compounded monthly. How much will you have at the end of five years?

Answer 1

To find the amount you will have at the end of five years in an account that pays 6% interest compounded monthly with an initial deposit of $5,000, you can use the formula for compound interest. Plugging the values into the formula, you'll have approximately $6,685.62 at the end of five years.

Step-by-step explanation:

To calculate the amount you will have at the end of five years, you can use the formula for compound interest:

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

Where:

• A is the amount of money you'll have at the end.
• P is the principal amount, which is $5,000 in this case.
• r is the interest rate, which is 6%, or 0.06, as a decimal.
• n is the number of times interest is compounded per year, which is 12 since it's compounded monthly.
• t is the number of years, which is 5.

Plugging the values into the formula, you'll get:

A = 5000(1 + 0.06/12)^(12*5)

Simplifying the calculation, you'll find that at the end of five years, you will have approximately $6,685.62.