Question

A college graduate invests $3,000 into an account that earns 6% annual interest compounded monthly. What is the value (in dollars) of

the investment after 5 years? (Round your answer to the nearest cent.)

Answer 1

$4,014.68

Explanation:

A = $4,014.68

A = P + I where

P (principal) = $3,000.00

I (interest) = $1,014.68

First, convert R as a percent to r as a decimal

r = R/100

r = 6/100

r = 0.06 rate per year,

Then solve the equation for A

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

A = 3,000.00(1 + 0.06/1)^(1)(5)

A = 3,000.00(1 + 0.06)^(5)

A = $4,014.68