Question

Peyton received a $5,000 bonus at work, and plans to invest it today. Her investment account will earn a 5% interest rate, compounded monthly. What will her account value be in 20 years? Peyton will have $___ in the account after 20 years.

Answer 1

FV = PV (1 + )nt

PV = $5,000

r = 0.05

n = 12

t = 20

FV = 5,000 (1 + )12 · 20

= 13,563

Explanation:

Answer 2

$ 13,563.20

Explanation:

Formula for total amount accrued or gathered after interest is compounded monthly = A = P(1 + r/n)^nt

A = Amount after t years

P = Initial amount Invested = $5,000

r = Interest rate = 5% = 0.05

n = compounding frequency = Every month = 12

t = time in years = 20

A = $5000(1 + 0.05/12)^20 × 12

A = $ 13,563.20

Therefore, Peyton will have $13,563.20 in the account after 20 years.