Question

Charles Adams deposited $1,000 in a savings account that earns 4%

interest compounded monthly. He made no other deposits or
withdrawals. What was the amount in the account at the end of 2
months? How much is the compound interest?
$1,006.67 and $6.67
$1,013.67 and $13.67
О. $1,020.10 and $20.10
$1,040.40 and $40.40

Answer 1

$1,013.67 and $13.67

Step-by-step explanation:

The formula for calculating compound interest is as follows

FV = PV × (1+r)^n

Where Fv is the future value

Pv is the present value, $1000

r is the interest rate 4%

n is number of periods= 2 months

Since time is in months, applicable interest rates will be 4% per year divided by 12 months multiplied by 2

=4/12 x 2 =0.67%

Fv = $1000 x (1 + 0.67/100)^2

Fv = $1000 x (1.0067)^2

Fv = $1000 x 1.01344489

Fv= $1,013.44

The amount will be $1,013.44.

Interest will be $1,013.44 - $1000 = $13.44