Question

1. Sam deposits$700 in an investment saving account. The annual

interest rate is 4.5%/annually compounded monthly. Determine

the amount after 7 years.​

Answer 1

The total amount in 7 years is: $958.62

Explanation:

Recall the formula for compound interest:

`A=P\,(1+(r)/(n) )^(n\,t)`

where:

A is the Accrued value (total in the account including accumulated interest), and in our case the unknown.

P is the Principal (amount initially deposited), and in our case $700.

r is the annual percent rate (but in decimal form) in our case 0.045

n is the number of compoundings done per year, and in our case 12 since it is compounded monthly

t is the time in years of the deposit.

Then the formula becomes:

`A=P\,(1+(r)/(n) )^(n\,t)\\A=700\,(1+(0.045)/(12) )^(12\,*\,7)\\A=958.61657`

which can be rounded to the cents: $958.62