Question

You deposit $25,000 into a bank that pays % 4 annual interest compounded monthly.

Answer 1

Answer

A: $28,000

B: 15 years

Step-by-step explanation:

A: Since $25,000 is deposited in the bank and you earn 4% interest annually over 3 years you would earn 12% interest. 12% of 25,000 is 3,000. The sum of 25,000 and 3,000 is 28,000 having you earn $28,000 over 3 years.

B: Since every year you earn 4% annual interest and you have $25,000 deposited in the bank you have to find what percentage of 25,000 equals 15,000. Since 25,000 isn't exactly easy to find multiply it by 4. That leaves you with 100,000 which we know you don't have in the bank but it will make it easier to find the percentage. You will also have to multiply 15,000 by 4 giving you 60,000. Now divide the 60,000 by 1,000 which equals 60. What's the point of the number 60? Well, that's the percentage it takes. Now divide 60 by the annual interest which is 4 and that gives you 15. 15 is the number of years it will take for the balance to reach $40,000.

Hope this helps!