Question

You put $126 in a savings account that earns 3% annual interest compounded monthly. You

do not make any deposits or withdrawals. How much will your investment be worth in 4
years?

Answer 1

$142.04

Explanation:

The compound interest formula tells you the value will be ...

A = P(1 +r/12)^(12t)

Principal P invested at annual rate r compounded monthly for t years.

__

Using the given values, the formula tells you the investment value will be ...

A = $126(1 +0.03/12)^(12·4) = $126(1.0025^48) ≈ $142.04

Your investment will be worth $142.04 in 4 years.