Question

Adam plans to invest $1500 today in a mutual fund. If he earns 12 percent interest compounded monthly, to what amount will his investment grow in 20 years? Use a financial calculator to make the calculation.​ a. ​$12,450 b. $17,289​ c. ​$15,897 d. ​$18,546 e. ​$16,339

Answer 1

e. $16,339

Step-by-step explanation:

Effective Annual rate = {(1 + r / m)^m - 1}

Where r= 12%, m=20

=[(1 + 12% / 12) ^ 12 ] - 1

= [(1 + 1%) ^ 12] - 1

= 1.1268 - 1

= 0.1268

= 12.68%

Value of investment after 20 year = $1,500 × (1 + 12.68%) ^ 20

= $1,500 × 10.8926

= $16,339